PRMIA 8020 ONLINE PRACTICE TEST ENGINE

PRMIA 8020 Online Practice Test Engine

PRMIA 8020 Online Practice Test Engine

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PRMIA 8020 Exam Syllabus Topics:

TopicDetails
Topic 1
  • Risk Management Framework: This section of the exam measures the skills of Risk Managers and covers the development and implementation of structured approaches for risk identification, evaluation, and mitigation. It includes industry-standard frameworks that guide risk strategy and decision-making. A key skill measured is establishing a risk management framework for organizations.
Topic 2
  • Insurance Mitigation: This section of the exam measures the skills of Insurance Risk Managers and covers strategies for transferring risk through insurance and other financial instruments. It focuses on risk transfer mechanisms, policy structuring, and claims management. A key skill measured is assessing risk transfer options through insurance.
Topic 3
  • Risk Governance: This section of the exam measures the skills of Compliance Officers and covers the policies, structures, and processes that define how organizations oversee risk. It explores regulatory compliance, ethical considerations, and corporate governance frameworks to ensure accountability. A key skill measured is applying governance frameworks to organizational risk policies.
Topic 4
  • Introduction: This section of the exam measures the skills of Risk Analysts and covers fundamental concepts of risk governance, management, and assessment. It introduces key principles, regulatory frameworks, and industry best practices for identifying and addressing risks. A key skill measured is understanding the foundational principles of risk management.
Topic 5
  • Risk Information: This section of the exam measures the skills of Risk Managers and covers the collection, analysis, and communication of risk-related data. It highlights the role of data-driven decision-making in mitigating uncertainties and ensuring compliance. A key skill measured is interpreting risk data for informed decision-making.
Topic 6
  • Risk Modeling: This section of the exam measures the skills of Quantitative Risk Analysts and covers mathematical and statistical techniques used to predict risk scenarios. It explores model development, validation, and application in financial and operational risk management. A key skill measured is applying statistical models for risk prediction.
Topic 7
  • Case Studies: This section of the exam measures the skills of Business Risk Consultants and covers real-world applications of risk management concepts. It examines case studies on risk governance, assessment, and mitigation strategies across different industries. A key skill measured is analyzing historical risk events for strategic insights.

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PRMIA ORM Certificate - 2023 Update Sample Questions (Q30-Q35):

NEW QUESTION # 30
What are some of the properties of Bottom-Up KRIs?

  • A. Are not used due to changes in regulations.
  • B. Selected by local management, based on key controls or weaknesses identified by audit reports, reported on quarterly.
  • C. Seated by senior management: tied to internal loss events at the legal entity, country, business and / or product level, reported.
    daily, weekly or monthly.
  • D. Selected by local management: tied to internal loss events at the legal entity, country, business and / or product level, reported daily, weekly or monthly.

Answer: D

Explanation:
Definition of Bottom-Up KRIs
Bottom-Up Key Risk Indicators (KRIs) are identified at the operational level, focusing on localized risks within business units.
They are tied to actual internal loss events and reported frequently (daily, weekly, or monthly) to capture ongoing trends.
Key Properties of Bottom-Up KRIs
Selected by local management → Ensures relevance to specific business areas.
Tied to internal loss events → Helps in tracking risk patterns within specific legal entities, countries, or business units.
Reported frequently → Allows for timely risk detection and mitigation.
Why Answer D is Correct
Bottom-up KRIs focus on localized risk exposure and are monitored frequently to track operational changes.
Why Other Answers Are Incorrect
Option
Explanation:
A . Seated by senior management: tied to internal loss events at the legal entity, country, business, and/or product level, reported daily, weekly, or monthly.
Incorrect - Senior management sets top-down KRIs, while bottom-up KRIs are managed locally.
B . Selected by local management, based on key controls or weaknesses identified by audit reports, reported quarterly.
Incorrect - While audit reports are useful, bottom-up KRIs are based on loss events, not just audit findings. Quarterly reporting is too infrequent.
C . Are not used due to changes in regulations.
Incorrect - Bottom-up KRIs remain essential despite regulatory changes.
PRMIA Reference for Verification
PRMIA Risk Indicator Best Practices
Basel Committee's Risk Measurement and Reporting Guidelines


NEW QUESTION # 31
What are some of the deficiencies associated with bottom-up Key Risk Indicators?

  • A. Mandates from a board that are too restrictive to implement.
  • B. Causal affects that are not adequately understood.
  • C. Lack of granularity.
  • D. Not reported frequently enough.

Answer: B

Explanation:
Definition of Bottom-Up Key Risk Indicators (KRIs)
Bottom-up KRIs are generated from operational-level data rather than high-level strategic indicators.
They are useful for monitoring localized risks but may fail to capture broad risk drivers.
Key Deficiencies of Bottom-Up KRIs
Lack of clarity on causal relationships - These indicators may detect risk trends but fail to explain root causes.
Focus on micro-level risks - They may miss systemic or enterprise-wide risk interactions.
Why Answer B is Correct
Bottom-up KRIs may indicate changes in risk levels but lack insight into the underlying causes, leading to reactive rather than proactive risk management.
Why Other Answers Are Incorrect
Option
Explanation:
A . Mandates from a board that are too restrictive to implement.
Incorrect - Board mandates apply to top-down governance, not bottom-up KRIs.
C . Not reported frequently enough.
Incorrect - Reporting frequency is an issue but not the primary deficiency; rather, it's the lack of causal insight.
D . Lack of granularity.
Incorrect - Bottom-up KRIs tend to be highly detailed (granular), making this answer incorrect.
PRMIA Reference for Verification
PRMIA Key Risk Indicator Best Practices
Basel Committee's Risk Measurement and Reporting Framework


NEW QUESTION # 32
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 management team's direction on the control of 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 lower risk-taking to an absolute minimum - zero if possible.
  • D. We prize the ability to implement the board's direction on the implementation of controls for risks.

Answer: D

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 # 33
For which of the following reasons did the Turnbull Report have a significant impact on risk governance?

  • A. It was a report that led to the establishment of the US Federal Reserve.
  • B. It defined the concept of risk governance for the insurance industry.
  • C. It was the first report to require a board to take specific account of risks and control systems for risks.
  • D. It was the first report to list the board as a proposed governance structure.

Answer: C

Explanation:
Step 1: What Is the Turnbull Report?
The Turnbull Report (1999) was a UK corporate governance report that set risk management expectations for boards.
It required companies to assess and manage risks effectively as part of corporate governance.
Step 2: Why Option C is Correct
Turnbull was the first report to mandate that boards must consider risk management in corporate governance.
This report established risk assessment as a board-level responsibility.
Step 3: Why the Other Options Are Incorrect
Option A ("Defined risk governance for insurance") → Incorrect because Turnbull applied to all sectors, not just insurance.
Option B ("First report to propose board structure") → Incorrect because corporate boards existed long before Turnbull.
Option D ("Led to the US Federal Reserve") → Incorrect because the Federal Reserve was established in 1913, long before Turnbull.
PRMIA Risk Reference Used:
PRMIA Corporate Governance Guidelines - Highlights Turnbull's role in board-level risk oversight.
UK Corporate Governance Code - Turnbull contributed to defining board risk responsibilities.
Final Conclusion:
The Turnbull Report was the first to require boards to consider risks in corporate governance, making Option C the correct answer.


NEW QUESTION # 34
For the Northern Rock case study, what was the low-probability-high-impact event that was most responsible for the loss event?

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

Answer: A

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 # 35
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