Question 1

A regional bank wants to improve its operational resilience to help keep pace with emerging best practices in this area. A consultant hired by the bank recommends that it establish a set of impact tolerances to improve its resilience. Which of the following correctly describes a potential benefit to the bank of establishing an impact tolerance?

Options :

A : It will help the bank optimize its allocation of resources to its most important business services.

B : It will enhance the bank’s ability to identify and limit concentration risk.

C : It will accurately estimate the severity of a potential disruption to an operational process and the amount of downtime that would result.

D : It will prevent failures of critical operational processes and the systems that support these processes.

Answer: A

Question 2

Which of the following actions is not an advantage of the central counterparty (CCP) in the centralized clearing process?

Options :

A : Eliminate counterparty risk.

B : Risk reduction through multilateral netting.

C : Improve operational efficiency.

D : Loss mutualization.

Answer: A

Question 3

A bank is located near a college campus and would like to attract students to the bank. Which of the following conditional pricing demand deposit accounts would most likely appeal to a college student?

Options :

A : A low or zero minimum balance account with low- to moderate-item charge/activity fees account.

B : A low or zero minimum balance account with high item charge/activity fees account.

C : A high minimum balance, no item charge/activity fees account.

D : A high minimum balance, high item charge/activity fees account.

Answer: A

Question 4

A risk analyst is implementing an enterprise risk management system at a bank. During the process, the analyst takes an inventory of risks faced by the bank and categorizes these risks as market, credit, or operational risks. Which of the following observations of the bank’s data should be considered unexpected if compared to similar industry data?

Options :

A : The operational risk loss distribution is symmetric and fat-tailed.

B : The operational risk loss distribution has many small losses, and therefore a relatively low mode.

C : The market risk distribution is symmetric.

D : The credit risk distribution is asymmetric and fat-tailed.

Answer: A

Question 5

Which of the following statements regarding risk management programs with service providers to manage outsourcing risk is correct?

Options :

A : The program should contain more detail if there are only a few outsourced activities to established service providers.

B : The program should focus on business continuity and contingency plans.

C : The program should contain adequate oversight and controls over all activities that impact the financial institution.

D : The program should require risk assessments to be updated as a result of updated risk mitigation techniques on a sufficiently regular basis.

Answer: B

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