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LOS a: Compare and contrast the main features of the risk management process, risk governance, risk reduction, and an enterprise risk management system. ffice ffice" />
Q1. Risk management has evolved into:
A) a series of small sets of independent activities.
B) a government mandated set of standards.
C) a broad set of interrelated activities.
Correct answer is C)
Risk management was once simply thought as hedging risk. Now managers must look at it from several perspectives. Various types of risks must be defined, measured and selectively managed. A desired level of risk must be selected and the actual risk monitored to see if it is in line with that selected level.
Q2. Each of the following is a step in the risk management process EXCEPT:
A) setting a target level of risk.
B) identifying the current level of risk.
C) filing taxes.
Correct answer is C)
There are five parts of the process: identify the desired level of risk, determine the current level of risk, bring the current level in line with the desired level, monitor the risk exposure to keep it line with the desired level, and alter the process to reflect new information, policies and preferences.
Q3. The final step in the implementation phase of the risk management process is to:
A) conduct a ffice:smarttags" />Monte Carlo simulation.
B) determine the optimal time to wait for addressing risk again.
C) identify and price the appropriate tools for achieving the objectives.
Correct answer is C)
After setting goals and assessing the current level of risk, the firm needs to see if the goals can be achieved cost-effectively. There is no “waiting” in risk management because it is an ongoing procedure. The Monte Carlo simulation may be involved in risk management, but it is certainly not the final step.
Q4. Yoshi Chu and Ryan Dobson have been tasked with creating an enterprise-wide risk management (ERM) system for Reliant Financial Services. After creating a centralized data warehousing facility, their next step is creating a useful analytics system. Which of the following features would be least likely included in their system?
A) Legal risk analysis.
B) Derivative valuation models.
C) Monte Carlo simulations.
Correct answer is B)
A useful analytics system for an ERM is used for assessing risk, not valuing individual assets. The useful system would include several VAR methodologies including historical VAR and Monte Carlo simulation, credit risk analysis, liquidity risk analysis, operational risk analysis, and legal risk analysis.
Q5. Risk management is best addressed:
A) monthly.
B) daily.
C) quarterly.
Correct answer is B)
Risk management is a continuous process; therefore addressing it more frequently is better.
Q6. One goal of all risk management systems should be to:
A) make the risk level equal to the prevailing level in the market.
B) bring the level of risk to a desired level of risk, which may exceed zero.
C) eliminate all risk, i.e., reduce risk to zero.
Correct answer is B)
Since return and risk go together, risk managers should determine the appropriate level of risk that is acceptable. The acceptable level should be based upon the nature of the firm and the risk tolerance of the stakeholders. Those that manage risk should be separate from those that take the risks.
Q7. Which of the following is the most difficult step in establishing an enterprise-wide risk management (ERM) system for a large firm?
A) Creating a centralized data warehousing system.
B) Establishing a monitoring and evaluation system.
C) Developing an analytics system.
Correct answer is A)
Establishing a centralized data warehousing system is the most difficult step in an ERM system because it involves coordinating an enormous amount of information from potentially different data systems requiring the output to be standardized and comparable across the institution.
Q8. Which of the following operations applies to the monitoring and evaluation systems of an enterprise-wide risk management (ERM) system?
A) Performing diagnostics on the pricing, value at risk (VAR) computations, and data quality.
B) Computing stress testing to complement traditional value at risk (VAR) based risk measures.
C) Computing value at risk (VAR) metrics for all risks across the firm.
Correct answer is A)
Monitoring and evaluation includes the ability to easily identify data problems, identify position limit violations, perform diagnostics on pricing and VAR measures computed by the analytics system, and allow for risk adjustments and performance evaluation.
Q9. Which of the following is the final step in the risk management process?
A) Identifying and measuring specific risk exposures.
B) Monitoring the process and taking any necessary corrective actions.
C) Reporting risk exposures (deemed appropriate) to stakeholders.
Correct answer is B)
The risk management process is a continual process of:
1. Identifying and measuring specific risk exposures.
2. Setting specific tolerance levels.
3. Reporting risk exposures (deemed appropriate) to stakeholders.
4. Monitoring the process and taking any necessary corrective actions.
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发表于 2009-4-7 09:21
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