CISI exam questions

Question 1

C10 - What is the most important factor if risks are to be meaningfully aggregated in an enterprise risk management function?

Answer 1

Confidence levels and time-frames need to be consistent .

Question 2

C10 - What functional area would not work on a day-to-day activities of ERM?

Answer 2

Internal audit

Question 3

C10 - What factor falls within a cultural challenge facing the implementation of ERM?

Answer 3

Departmental terminology

Question 4

C10 - Measurement approaches need to? what wont it be sufficient to use?

Answer 4

Measurement is needed to make direct comparisons between asset classes.

Wont be sufficient to use tracking errors, but instead VaR

Question 5

what does a loss given calculation enable a lending bank to do?

Answer 5

calculate the loss at default adjusted for mitigating factors

Question 6

why is existing management info inadequate?

Answer 6

it is inadequate as the basis for set of operational risk indicators, this is because it is used to monitor performance not risk

Question 7

what is a measure of the time it takes to achieve a deal in the market?

Answer 7

IMMEDIANCY

Question 8

if operational risk materializes, what other risks are caused?

Answer 8

reputational and compliance

Question 9

what mathematical problem for portfolio optimization?

Answer 9

maximizing the expected return for given risk

Question 10

what are short-dated government bonds used for?

Answer 10

sharpe ratio

Question 11

how has the introduction of the senior management regime affected regulated firms?

Answer 11

Firms have to map out all the management responsibilities of staff exercising senior management functions

Question 12

which business function is responsible for the provision of info on insurance agreements in ERM programs?

Answer 12

Operational risk teams

Question 13

which risks are more uncertain due to data?

Answer 13

operational and strategic

Question 14

in market dislocation, it is common that?

Answer 14

banks become unwilling to pass on liquidity to customer loans

Question 15

how to improve the internal credit rating system?

Answer 15

Periodically carry out an independent review of accuracy of review

Question 16

what did Basel 111 do when introducing countercyclical capital buffer?

Answer 16

restricting banks participation in system-wide credit booms

Question 17

in ERM, what info is passed up to the chain of command?

Answer 17

Risk above the designated threshold and limit

Question 18

what is the aim of a liquidity gap analysis?

Answer 18

determine which cash flow in each maturity bracket net to zero.

Question 19

in a maturity ladder, how should banks approach representation of instruments which are exposed to counterparty risk?

Answer 19

include them but carry out risk weighting

Question 20

what measure is used to quantify different types of risk consientley?

Answer 20

VaR

Question 21

What is the purpose of using both gross/net risk rating

Answer 21

access the effectiveness of controls

Question 22

how should danger limits for OR be?

Answer 22

pre-defined

Question 23

what is showed to show how closely a portfolio follows its benchmark?

Answer 23

tracking error

Question 24

what are the limitations of risk models

Answer 24

Tend to represent simplified view of reality

Question 24

what is the board of director responsibility?

Answer 24

Ensuring the company has effective crisis management process

Question 25

what is true about negative correlation

Answer 25

on average, they move in opposite direction

Question 26

what is asset allocation?

Answer 26

consider the prospects for major assets globally.

Question 27

what is the key role of the BIS?

Answer 27

Regulatory guidelines

Question 28

what is expected to have the lowest Tracking error?

Answer 28

Index funds

Question 29

what is expected to have the lowest SD return?

Answer 29

Investment grade bonds

Question 30

which stage of money laundering links to keep adequate records

Answer 30

intergration

Question 31

what is a disadvantage of a liquidity gap analysis?

Answer 31

assumes all cash flows will occur

Question 32

in terms of macroeconomic environment and PESTLE analysis, what does it typically include what is the method for external risks anaylsis

Answer 32

brainstorming with internal and external experts. business processes analysis

Question 33

what are the BIS main key risks?

Answer 33

operational risk, asset liquidity, funding liquidity, interest rate risk, credit and market

Question 34

what is the top-down and bottom-up method including?

Answer 34

Risk appetite (risk tolerance)

Question 35

what is true about the statuary approach?

Answer 35

it is done by the US SEC (securities and exchange commission)

Question 36

what is supervision in terms of national regulator responsibility?

Answer 36

day-to-day regulatory relationship with firms . process of monitoring to ensure they adhere to regulatory guidelines

Question 37

what is an example of what's included in Pillar 2

Answer 37

Supervisory process - quality of infrastructure - it is the internal processes

Question 38

what is evidence in regards to the 'Use-test'

Answer 38

relevant meeting notes from the board or seniors , review and sign-off procedures , senior management or board challenge

Question 39

why was the BcBs set up?

Answer 39

primary global standard setter for prudential regulations and provides cooperation on banking supervisory matters.

Question 40

what would enable a firm to hold less capital to gross risk under pillar 2

Answer 40

the quality and controls framework

Question 41

losses arising from a breach of discrimination rules relates to what?

Answer 41

employment practises

Question 42

what does risk measurement do

Answer 42

models the frequency and impact of a risk by using statical predictions. THEY measure quantative techniques to understand size of the business.

Question 43

what is the primary purpose of identifying and categorising operational risks to enable a firm to do? what does a by-product enable a firm to do?

Answer 43

risk profile and appetite by-product = enable a common language

Question 44

losses arising from fiduary duties is caused by what?

Answer 44

Business practises

Question 45

segregation of duties is used why in an operational risk policy?

Answer 45

effectively manage and control processes

Question 46

the bottom-up approach/type of risk assessment which builds a detailed profile does what?

Answer 46

uses loss data and experience of relevant personnel's.

Question 47

what is done for the layering and placement stage?

Answer 47

Identification of customers and reporting suspicious transactions

Question 48

what is done in the integration stage?

Answer 48

keeping adequate records

Question 49

in what kind of risk model is a scenario impact distribution commonly simulated with a lognormal distribution?

Answer 49

operational risk

Question 50

policies to address managing the risk associated with risk models should include?

Answer 50

Accuracy targets

Question 51

the shape of a distribution curve used to model the impact of operational risk events is characterised by which?

Answer 51

it is fat tailed

Question 52

in a monte Carlo simulation, to determine the likelihood of each scenario occurring, the distribution algorithm most commonly used is:

Answer 52

Poisson = likelihood of each scenario occurring on particular iteration