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PRMIA ORM Certificate - 2023 Update Sample Questions (Q36-Q41):

NEW QUESTION # 36
What are the roles of business versus risk management in developing and implementing risk assessments?

A. Business owns the risk assessment process so risk management does not play a role in the process.
B. Risk management, in its role as second line of defense, performs the risk assessment process from beginning to end. There is no business line involvement.
C. Business management's role in the risk assessment process should be confined to oversight.
D. The business owns the risk assessment process, while risk management develops the framework, helps facilitate the process, and provides supervision and oversight.

Answer: D

Explanation:
The Principles for Risk Governance, as established by PRMIA (Professional Risk Managers' International Association), emphasize the Three Lines of Defense (3LoD) Model, which is widely used in risk management and governance frameworks.
Business Line Ownership of Risk (First Line of Defense)
The business units are responsible for identifying, assessing, managing, and monitoring risks within their operations.
Since they generate the risks through their activities, they must own the risk assessment process.
This aligns with PRMIA Governance Principles, which state that risk management should be embedded within business operations to ensure proactive risk identification and control.
Risk Management's Role (Second Line of Defense)
The risk management function is not directly responsible for conducting risk assessments but plays a key role in designing and maintaining the risk assessment framework.
This includes setting standards, methodologies, and tools for assessing risks across business functions.
Risk management provides supervision and oversight, ensuring that risk assessments align with organizational policies and regulatory expectations.
Oversight from Senior Management & the Board (Third Line of Defense)
Internal audit (third line of defense) independently reviews and provides assurance that the risk management framework is effective and that risk assessments are conducted properly.
PRMIA's Risk Governance Standards emphasize that internal audit should evaluate the effectiveness of the risk assessment framework without being involved in its direct execution.
Why Other Answers Are Incorrect
Option
Explanation:
A . Risk management, in its role as second line of defense, performs the risk assessment process from beginning to end. There is no business line involvement.
Incorrect - Risk management facilitates and oversees the risk assessment process, but the business must take ownership of the risks it generates.
C . Business owns the risk assessment process so risk management does not play a role in the process.
Incorrect - While the business owns the process, risk management plays a crucial role in developing the framework, setting policies, and providing oversight.
D . Business management's role in the risk assessment process should be confined to oversight.
Incorrect - Business management is actively responsible for executing risk assessments, not just overseeing them.
PRMIA Reference for Verification
PRMIA Standards for Risk Governance - Establishes the Three Lines of Defense and the separation of responsibilities.
PRMIA Risk Management Framework (RMF) Guidelines - Defines the roles of business and risk management in risk assessment.
PRMIA Enterprise Risk Management Best Practices - Outlines how risk management facilitates risk assessments while the business retains ownership.
This answer is verified according to PRMIA's official risk governance documents and best practices. Would you like additional clarification or supporting documentation references?

NEW QUESTION # 37
For the Barings case study, what external event may have accelerated the discovery of the loss event?

A. The collapse of Lehman Brothers into bankruptcy m 2008.
B. The collapse of Lehman Brothers into bankruptcy in 2002.
C. The Kobe earthquake of January 17th 1995.
D. The Singapore earthquake of January 17th 1995.

Answer: C

Explanation:
Background of the Barings Case Study
The Barings Bank collapse occurred due to unauthorized derivatives trading by Nick Leeson in Singapore.
Leeson concealed losses, and his trading positions became unmanageable.
How the Kobe Earthquake Affected Barings
On January 17, 1995, the Kobe earthquake caused extreme market volatility.
Leeson's unauthorized trades were highly exposed to the Nikkei 225 index, and the earthquake triggered heavy losses.
The event accelerated the exposure of Leeson's fraudulent activities, leading to Barings' collapse.
Why Answer D is Correct
The Kobe earthquake created market turmoil, forcing Barings to confront its financial position, ultimately revealing the hidden losses.
Why Other Answers Are Incorrect
Option
Explanation:
A . The collapse of Lehman Brothers into bankruptcy in 2002.
Incorrect - Lehman Brothers collapsed in 2008, not 2002.
B . The Singapore earthquake of January 17th, 1995.
Incorrect - No significant earthquake occurred in Singapore on that date.
C . The collapse of Lehman Brothers into bankruptcy in 2008.
Incorrect - Barings collapsed in 1995, not related to Lehman Brothers' 2008 failure.
PRMIA Reference for Verification
PRMIA Case Study on Barings Bank Collapse
Basel Committee Principles on Risk Oversight and Fraud Prevention

NEW QUESTION # 38
For the Northern Rock case study, what was the low-probability-high-impact event that was most responsible for the loss event?

A. An exposure to real estate funds, heavily concentrated in Berlin.
B. Liquidity dried up in the inter-bank and commercial paper markets.
C. The Bank of England's withdrawal of Deposit Protection.
D. The acquisition of Merrill Lynch by copyright.

Answer: B

Explanation:
Step 1: Understanding the Northern Rock Case Study
Northern Rock was a UK bank that collapsed in 2007 due to its heavy reliance on short-term wholesale funding rather than customer deposits.
When the 2007 financial crisis hit, the inter-bank lending market and commercial paper market froze, cutting off Northern Rock's access to liquidity.
Step 2: Why Option C Is Correct
Northern Rock depended on short-term borrowing to fund long-term mortgage lending.
When the liquidity crisis hit, it couldn't refinance its debt, leading to a bank run and collapse.
The Bank of England had to intervene, and the UK government nationalized Northern Rock in 2008.
Step 3: Why the Other Options Are Incorrect
Option A ("Acquisition of Merrill Lynch") → Incorrect because this happened in 2008, after Northern Rock's failure.
Option B ("Withdrawal of Deposit Protection") → Incorrect because UK deposit protection remained in place.
Option D ("Real estate exposure in Berlin") → Incorrect because Northern Rock's problem was funding liquidity, not real estate losses.
PRMIA Risk Reference Used:
PRMIA Liquidity Risk Management Framework - Describes how liquidity shocks impact banks like Northern Rock.
Basel III Liquidity Coverage Ratio (LCR) Standards - Created after Northern Rock to prevent similar liquidity crises.
Final Conclusion:
The collapse of the inter-bank and commercial paper markets was the key low-probability-high-impact event that led to Northern Rock's failure, making Option C the correct answer.

NEW QUESTION # 39
Governance can be defined as which of the following?

A. Governance is a structure specifying the ways in which reporting is made to the primary regulator.
B. Governance is a structure specifying the daily operation of a firm.
C. Governance is a structure specifying the policies, principles, and procedures for making decisions about corporate direction.
D. Governance is being replaced by management in all firms that are regulated.

Answer: C

Explanation:
Definition of Governance
Governance refers to the framework of policies, principles, and processes used to guide corporate decision-making and strategic direction.
It ensures accountability, transparency, and risk oversight within an organization.
Key Elements of Governance
Risk oversight - Ensuring risks are properly identified and managed.
Accountability structures - Defining roles and responsibilities.
Decision-making frameworks - Establishing policies for long-term corporate success.
Why Other Answers Are Incorrect
Option
Explanation:
A . Governance is a structure specifying the daily operation of a firm.
Incorrect - Governance focuses on high-level corporate oversight, not day-to-day operations.
B . Governance is a structure specifying the ways in which reporting is made to the primary regulator.
Incorrect - Governance is broader than just regulatory reporting.
C . Governance is being replaced by management in all firms that are regulated.
Incorrect - Governance and management are separate but complementary; governance provides oversight, while management executes strategy.
PRMIA Reference for Verification
PRMIA 10 Principles of Good Governance

NEW QUESTION # 40
Which of the following statements is best for inclusion in the values to be set for a Risk Function?

A. We prize the ability to implement the board's direction on the implementation of controls for risks.
B. We prize the ability to ensure that the Risk Function's opinions are listened to and acted upon.
C. We prize the ability to implement the management team's direction on the control of risks.
D. We prize the ability to lower risk-taking to an absolute minimum - zero if possible.

Answer: A

Explanation:
Step 1: Role of a Risk Function
A Risk Function ensures that an organization follows best practices in risk governance, assessment, and control implementation.
It should be aligned with the board's risk strategy and ensure independent oversight.
Step 2: Why Option B is Correct
The board sets the overall risk strategy, and the risk function implements risk controls accordingly.
PRMIA emphasizes board oversight as the guiding force behind risk management.
Step 3: Why the Other Options Are Incorrect
Option A ("Implement management's direction") → Incorrect because risk oversight should be board-driven, not solely management-driven.
Option C ("Ensure opinions are listened to") → Incorrect because risk functions enforce policies, not just share opinions.
Option D ("Lower risk-taking to zero") → Incorrect because risk-taking is necessary for growth-excessive risk aversion harms business.
PRMIA Risk Reference Used:
PRMIA Risk Governance Framework - Highlights board oversight in risk management.
Basel III Risk Management Standards - Emphasizes board-driven risk controls.
Final Conclusion:
The Risk Function must follow the board's direction in implementing risk controls, making Option B the correct answer.

NEW QUESTION # 41
......

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8020 VALID DUMPS DEMO | 100% FREE USEFUL ORM CERTIFICATE - 2023 UPDATE VALID REAL EXAM

8020 Valid Dumps Demo | 100% Free Useful ORM Certificate - 2023 Update Valid Real Exam