Ch. 2: RM stds & guidelines

Question 1

risk management standard (definition)

Answer 1

A document published by a recognized authority that includes principles, criteria, and best practices for risk management

Question 2

framework (definition)

Answer 2

A structure, including elements such as concepts, methods, procedures, and metrics, that supports the risk management process

Question 3

common purpose shared by all risk standards

Answer 3

helping organizations assess and manage risk

Question 4

similarities among risk management standards and frameworks (6)

Answer 4

Adoption of an enterprise approach
Structured process steps
Understanding of and accountability for defining risk appetite
Formal documentation of risks in risk assessment activities
Establishment and communication of risk management process goals and activitites
Monitored treatment plans

Question 5

criteria on which to select a risk management standards (4)

Answer 5

Alignment with organizational objectives
Adherence to controls
Need to meet regulatory requirements (compliance)
Risk governance

Question 6

risk governance (definition)

Answer 6

Integration of the management principles governing the organization with the risk management process

Question 7

the seven essential attributes of the RIMS Risk Maturity Model

Answer 7

ERM-based approach
ERM process management
Risk appetite management
Root cause discipline
Uncovering risks
Performance management
Business resiliency and sustainability

Question 8

risk management framework (definition)

Answer 8

A foundation for applying the risk management process throughout the organization

Question 9

risk criteria (definition)

Answer 9

Reference standards, measures, or expectations used in judging the significance of a given risk in context with strategic goals

Question 10

The COSO framework is designed to help an organization achieve its objectives in these four categories

Answer 10

Strategic – high-level goals, aligned with and supporting its mission
Operations – effective and efficient use of resources
Reporting – reliability of reporting
Compliance – compliance with applicable laws and regulations

Question 11

inherent risk (definition)

Answer 11

Risk to an entity apart from any action to alter either the likelihood or impact of the risk

Question 12

residual risk (definition)

Answer 12

Risk remaining after actions to alter the risk’s likelihood or impact

Question 13

risk-based capital (definition)

Answer 13

Amount of capital an insurer needs to support its operations, given the insurer’s risk characteristics

Question 14

modeling (definition)

Answer 14

In data analysis, a system of calculating known outcomes based on current data and then applying these calculations to new data to predict future outcomes

Question 15

Solvency II aims to achieve consistency across Europe in these areas (5)

Answer 15

Market-consistent balance sheets
Risk-based capital
Own risk and solvency assessment (ORSA)
Senior management accountability
Supervisory assessment

Question 16

the three pillars of Solvency II

Answer 16

Pillar 1 – financial requirements; adequate capitalization
Pillar 2 – higher standards of risk management, forward-looking self-assessment of risks
Pillar 3 – greater levels of transparency

Question 17

the three pillars of Basel II

Answer 17

1 – Minimum capital requirements
2 – Supervisory review
3 – Disclosure “to strengthen market discipline and complement supervisory efforts”

Question 18

goals of Basel III (3)

Answer 18

Improve banking sector’s ability to absorb shocks from financial & economic stress
Improve risk management & governance
Strengthen bank transparency & disclosures