OSFI.CorpGov

Question 1

FRFI stands for..?

Answer 1

Federally Regulated Financial Institution

Question 2

Define ‘corporate governance

Answer 2

Set of relationships between: Board of Directors, management, shareholders and other stakeholders

Question 3

Identify 2 characteristics of good corporate governance

Answer 3

1. Incentivizes good behaviour
2. Enables monitoring of operations & performance

Question 4

Contrast the roles of the Board of Directors and Senior Management

Answer 4

Board of Directors:
1. Direction-setting
2. Oversight of management

Senior Management: 
1. Implement Board of Directors decisions
2. Oversight of operations

Question 5

Briefly explain the role of corporate governance in OSFI’s supervision (2)

Answer 5

OSFI relies on good Corporate Governance to support its supervisory role

OSFI requires BoD involvement during interventions to determine best corrective actions

Question 6

Identify and describe 2 items that should be included in the design of a Risk Appetite Framework (RAF)

Answer 6

1. Risk Appetite Statement:
   Reflects the level of risk and type of risk FRFI is willing to accept to meet
   business objectives
2. Risk Limits
   Refers to allocations of FRFI’s RAS to:
   
   • Risk categories (IMCO)
   • Business unit
   • LOB or product
3. Roles & Responsibilities of those implementing the RAF

Question 7

Identify the 4 key features of the risk appetite statement

Answer 7

1. Relate to short & long term strategies
2. Includes qualitative / quantitative measures of risk
3. Forward-looking
4. Consider normal and stressed scenarios

Question 8

Briefly explain the qualitative and quantitative measures within the risk appetite statement

Answer 8

QUALITATIVE:
Identify significants risks company wants to take/avoid + why

QUANTITATIVE:
Measures of ECL (earnings, capital, loss) FRFI is willing to accept

Question 9

How is compliance with risk appetite framework ensured? (3)

Answer 9

CRO:
1. Ensures risk limits are CONSISTENT with risk appetite statement
2. Provides reports to BoD & SnrMgmt ASSESSING risk limits and risk
appetite statement

INTERNAL AUDITOR:
3. Ensures COMPLIANCE with risk appetite framework