ORM

ORM practice questions, page 2 of 3, with answer review and explanations.

Question 6

How can a chief risk officer encourage the governing body and executive management team to create a stronger risk culture?

  1. Having a vision of achievable but not excessive ambition.
  2. Discourage personal accountability to avoid a blame culture.
  3. Establish a set of objectives that the board and executive team must adhere to.
  4. Balance rewarding success in profitability goals with punishment when there is a failure to achieve goals.

Question 7

For credit risk losses containing operational risk elements that have been historically included in an organizations’ credit risk database, how should the loss amount be treated?

  1. The entire loss amount is treated as credit risk.
  2. The entire loss amount is treated as operational risk.
  3. The loss amount is split into credit and operational risk components.
  4. The entire loss amount is treated as credit risk, but the loss is entered as a memorandum within the operational loss database and not used for capital modeling purposes.

Question 8

How should Near Misses and Opportunity Costs be treated within Operational Risk?

  1. Ignored.
  2. Recorded and Analyzed, Used in calculation of Operational Risk Capital.
  3. Reported, Recorded and Analyzed, Not Used in calculation of Operational Risk Capital.
  4. Reported, Recorded and Analyzed, Used in calculation of Operational Risk Capital.

Question 9

Which of the following principles is critical when creating the optimum policy range and content?

  1. Policies should be divided into a large number of short topics to enhance accessibility.
  2. Policy owners must ensure that policies are read by the regulator and then the shareholders.
  3. Hard copies of a new policy should be placed in a central library of governance documents at the CRO’s home.
  4. New policies should be accompanied by suitable training for the target audience and added to the content of new employee training.

Question 10

Ideally, which of the following should be completed as part of the risk assessments of service providers?

  1. An assessment of a third party should include its compliance and risk infrastructure, financials, business strategy and operating history.
  2. An assessment of a third party should not include its compliance and risk infrastructure, financials, business strategy and operating history.
  3. Onsite visits are not advantageous for understanding the third party’s risks and control environment.
  4. A review of the pay levels of the staff supporting the service.