Financial Risk and Regulation (FRR) Series (2016-FRR) Practice Test

Questions # 111:

Which of the following statements about implementation of a successful RCSA program is correct?

Options:

An RCSA is only complete after all possible mitigating actions have been identified and analyzed as a result of the assessment process.

Internal loss data help to identify the risks and control weaknesses that need to be addressed in the RCSA; external events are not helpful in informing the discussions around potential risks.

The RCSA scoring methodology should include only financial impacts and not include reputational, legal, regulatory, client and life safety impacts.

To ensure that the RCSA is well designed, it is important to interview participants, stakeholders and support functions prior to the launching the RCSA.

Questions # 112:

Which of the following statements regarding CDO-squared is correct?

I. CDO-squared use other CDOs and CMOs as collateral.

II. Risk assessment of CDO-squared is almost impossible due to their complexity.

III. CDO-squared have lower credit risk than CMOs but higher than CDOs.

Options:

I only

I and II

II and III

I, II, and III

Questions # 113:

To ensure good risk management which of the following should be true about the CRO role and function?

Options:

The CRO should receive compensation that is directly determined by the profit of the trading desk.

The CRO should report to the CEO or the Board of Directors.

The CRO should not be involved with the setting of risk limits.

To ensure efficient flow of information the CRO should not be independent of business units.

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