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Boards, including Audit and Risk Committees must:

I. Clearly articulate the corporate risk appetite to senior management

II. Thoroughly review compensation plans of potentially "highly compensated positions" for consistency with corporate risk appetite, competitive market conditions and fiduciary responsibility to shareholders

III. Have a single member formally given responsibility for understanding and reporting the effectiveness of the corporation's risk management infrastructure

IV. Be fully accountable to shareholders and work to the benefit of public good and financial stability

A.

I and II only

B.

I, II and IV only

C.

I, II and III only

D.

All of these are responsibilities of Board and Audit Committees

Taisei Fire and Marine Insurance Co

A.

relied almost entirely on Fortress Re's management team for information on the risks in its portfolio

B.

relied on the information it received from other members of the reinsurance pool to manage its risks

C.

had a full understanding from Fortress Re of the risks in the pool

D.

had a full understanding from other members of the pool of the pool's liabilities

A PRMIA member is offered a highly paid work assignment on the condition that some aspects of assignment are not to be done according to PRMIA standards.

What should they do?

A.

Perform the assignment, noting in the final report the standards to which the assignment was done

B.

Accept the assignment, produce and deliver two reports according to both standards

C.

Accept the assignment, and prior to doing any work, report the conflict of interest to the organization's compliance department

D.

The PRMIA member should place the integrity of the risk management profession and users of risk management above their own personal interests, and refuse the work

According to the Group of 30 Report, deriving aggregate potential credit exposure for a counterparty by adding up the potential exposure of multiple transactions:

A.

Gives an accurate result in most cases

B.

Captures portfolio effects but not tenor differences

C.

Can easily reflect the impact of netting

D.

Overstates exposure in most cases

Which is NOT part of the guidance on Professional Conduct in the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct)?

A.

Know and abide by applicable rules and regulations

B.

Clearly inform all affected parties of any apparent or actual conflicts of interest

C.

Report to the Regulator any departures from generally accepted methodology or practices

D.

Provide advice that is clear and accurate

The key people involved in the application of good governance and risk management must:

I. be trustworthy

II. be honest

III. be approved by the local regulator

IV. treat others fairly at all times

A.

I, II, and III only

B.

III only

C.

I, II, and IV only

D.

I, II, III and IV above

Up until 2006, which of the following was not a primary driver for Washington Mutual's earning?

A.

Lending to consumers and small businesses.

B.

Deposit taking activities which generated net interest income.

C.

The provision of fee based services to its customers.

D.

Complex derivative trades based on volatility indices.

Mary Jones wants the Bylaws of PRMIA to be changed so that people can't join PRMIA unless they meet a set of criteria she has devised with her colleagues. She can do this by getting which of the following approvals:

A.

The Board of Directors, but only if the Blue Ribbon Panel affirms the change

B.

The Board of Directors and a majority of the Members

C.

The Board of Directors alone

D.

34 of all Members

As a result of the US government's intervention, which of the following is true?

A.

The cost of borrowing for Fannie Mae and Freddie Mac should decline because the government will be standing behind their debts and the buying and selling of mortgage debt will continue

B.

The cost of borrowing for house buyers will rise because of the risk premium now built into the cost of such a government guarantee

C.

The systemic risks still remain in the housing market because it increases the US government's debt

D.

Foreign Central Banks will continue to sell their holdings of Fannie Mae and Freddie Mac securities

Which of the following should NOT be part of the Risk Management Infrastructure?

A.

Define the organization's definition of risk management as articulated by the Board in clear and uncertain terms

B.

Include financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting

C.

Be independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader

D.

Review continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole