Key topics to study

Question 1

Which of the following would be a marker of a robust risk culture within a firm?

Answer 1

• Management of risk is an integral part of business decision making.

Question 2

Which of the following communicates how the management of operational risk can enable a firm to achieve its business objectives?

Answer 2

• Operational risk policy.

Question 3

Which of the following are all main categories of external change?

Answer 3

• Environmental, political, regulatory, legal changes.

Question 4

What are the key elements of a firm’s risk appetite framework?

Answer 4

• Risk appetite statements, targets, metrics and policies.

Question 5

Which of the following provides information to assist risk identification?

Answer 5

• Details of planned change and transformation.

Question 6

Which of the following is the main advantage of adopting a workshop approach to risk and control self-assessment?

Answer 6

• There is an opportunity to mitigate estimation bias.

Question 7

**When reporting risk and control self-assessments to boards and senior management it is suggested the following detail is included: **-

Answer 7

• Key risk drivers, residual risk and control self-assessment result, heat maps

Question 8

Which of the following could best be described as a performance indicator?

Answer 8

• Asset growth.

Question 9

Why is it a desirable feature for risk indicators to be “auditable”?

Answer 9

• Because it allows independent validation of how indicators are sourced, aggregated and delivered to management.

Question 10

Implementing an effective operational risk indicator framework involves a number of tasks and decisions.

Answer 10

• Documenting the governance arrangements for overseeing the Key Risk Indicator framework.
• Agreeing whether indicators are to be selected on a top down or bottom up basis.
• Developing procedures for adding or changing indicators.
• Setting RAG thresholds.

Question 11

The statement “all Key Risk Indicators must be ‘leading’ rather than ‘lagging’ to be effective” is:

Answer 11

• Incorrect, as leading Key Risk Indicators are difficult to achieve because they rely partly on historical data.

Question 12

Which of the following is an indirect impact of an operational risk event?

Answer 12

*Client dissatisfaction.

Question 13

What is root cause analysis primarily interest in identifying?**

Answer 13

• Control failure.

Question 14

What is the biggest challenge in collecting risk event data?

Answer 14

* Incomplete reporting.

Question 15

It is difficult to make a direct comparison with another firm’s experience from external loss event data. Which of the following differences might best explain the reasons for that?

Answer 15

• Control environment, risk appetite, risk culture.

Question 16

Which of the following best describes the use of external loss event data?

Answer 16

• Useful for creating realistic scenarios.

Question 17

What are the 3 factors that can mitigate the subjectivity of scenario analysis?

Answer 17

• Participant, business environment and purpose.

Question 18

Which of the following business lines has a beta factor of 15% within the Standardised Approach?

Answer 18

*
Agency Services.

Question 19

Identify the Operational Risk Capital approach that is Risk Weighted according to Business Line:

Answer 19

• Standardised Approach.

Question 20

Which combination of the following methods may be used to express an organisation’s appetite for operational risk in a quantitative way?

Answer 20

• Thresholds for key control indicators.
• VaR models of operational risk capital.
• Limits on reported operational losses.

Question 21

Which of the following data categorisation element types would be most relevant for identifying key risk indicators?

Answer 21

• Causal type.

Question 22

Which of the following provides information to assist risk identification?

Answer 22

• Details of planned change and transformation.

Question 23

Which of the following is the main advantage of adopting a workshop approach to risk and control self-assessment?

Answer 23

• There is an opportunity to mitigate estimation bias.

Question 24

It is difficult to make a direct comparison with another firm’s experience from external loss event data. Which of the following differences might best explain the reasons for that?

Answer 24

• Control environment, risk appetite, risk culture.

Question 25

Which of the following is a method of validating scenario analysis results?

Answer 25

• Compare the results against a known data source.