MCQ Risk - Chapter 3 Flashcards
Market abuse is covered by which of the following?
A
Proceeds of Crime Act
B
Criminal Justice Act
C
Markets in Financial Instruments Directive
D
Market Abuse Regulation
D
Market Abuse Regulation
How many operational risk type events have been identified by the basel Committee?
A
4
B
5
C
7
D
11
C
7
Who is the inter-governmental body that sets standards to combat money laundering and terrorist financing?
A
NCA
B
FATF
C
FCA
D
ASB
B
FATF
Which of the following is a main function of risk reporting?
A
To establish the cost of risk measurement
B
To establish firm-wide adoption of appropriate risk parameters
C
To determine acceptable levels of risk
D
To reduce uncertainty
D
To reduce uncertainty
Within a simple operational risk framework, which one of the following stages would precede the Risk Measurement and Assessment stage?
A
Risk Identification
B
Risk Monitoring
C
Risk Reporting
D
Management and Control
C
Risk Reporting
The self assessment method of identifying risk would typically use?
Bottom-up analysis
Top-down analysis
Questionnaires for scoring risks
Scenario analysis
Questionnaires for scoring risk
The type of risk assessment that uses a detailed profile of the risks occurring in each area then aggregates them to provide an overall measure of exposure does so by
Using loss data and experience of relevant personnel
Relying on the experience of business professionals to capture relevant scenarios
Compiling a heat map
Plotting net and gross risk seperatly
Using loss data and experience of relevant personnel
Which of the statements below is true concerning the causes of operational risk?
A
External environmental causes include integrating the cultures of separate organisations
B
Straight-through-processing (STP) reduces technology risk but increases people risk
C
All causes of operational risk are inter-dependent and may have a knock-on effect with each other
D
A cure for the inefficiencies incurred due to an increase in volume is to increase the number of staff proportionately
C
All causes of operational risk are inter-dependent and may have a knock-on effect with each other
Which of the following is not a potential risk-mitigation strategy?
A
Retain the risk
B
Transfer the risk
C
Reduce the likelihood
D
Change the risk
D
Change the risk
Which of the following is NOT considered a significant practical problem of risk identification?
A
Difficulty in categorising the risk data
B
Lack of reliable historic data
C
Time consuming
D
Lack of trained staff
xplanation - Correct Answer: D
Practical problems of risk identification include lack of reliable data, the time involved in identifying risk and categorising risk data.
How many operational risk type events have been identified by the basel Committee?
A
4
B
5
C
7
D
11
Explanation - Correct Answer: C
The Basel Committee has identified 7 operational risk event types:
Internal Fraud; External Fraud; Employment Practices and Workplace Safety; Clients, Products, & Business Practice; Damage to Physical Assets; Business Disruption & Systems Failures; Execution, Delivery & Process Management
Managing operational risk may be achieved through operational controls. Which of the following statements concerning operational controls is true?
A
They are measures inserted into a process that enhance that process in a direct way
B
They are a set of rules and guidance issued by the risk control function of an organisation
C
They are activities inserted into the operational process to prevent specific operational risks from occurring
D
They are the graphical user interface (GUI) of an operational control system
Explanation - Correct Answer: C
Operational controls are activities inserted into the operational process to prevent specific operational risks from occurring.
Which of the following is a main function of risk reporting?
A
To establish the cost of risk measurement
B
To establish firm-wide adoption of appropriate risk parameters
C
To determine acceptable levels of risk
D
To reduce uncertainty
Explanation - Correct Answer: D
Risk reporting is the mechanism of communicating the losses, exposure and risks to management in order to reduce uncertainty.
Which method of measurement is more effective when used in conjunction with other methods?
A
Scenario analysis
B
Top-down approach
C
Self-assessment
D
Benchmarking
C
Self-assessment
Which of the following is NOT a reason for identifying risk?
A
Provide information to management on which to make decisions and take action
B
Provide a basis for risk measurement and assessment
C
Assesses risk on a holistic level
D
Develop a common language for discussing, managing and assessing risk
Explanation - Correct Answer: C
Rather than assess risks on a holistic level, identifying risk set boundaries to differentiate between operational risk and other types of risk.
