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NEW QUESTION # 55
A risk manager has just completed a risk assessment project. The report has been given to the risk manager's direct supervisor, who refuses to escalate the material issues raised in the report. Further, the direct supervisor edits the report to remove the section describing the material risk, who then submits it to the firm's Executive Committee.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), which of the following actions is most appropriate:
- A. Escalation of the issue is against the Code of Conduct because one should respect the administrative structure of the organization
- B. The risk manager should attempt to resolve the conflict with the direct supervisor, but if that does not work, they should contact the Whistle-Blowing Hotline of the organization. If no such hot-line is in place, they should contact the PRMIA Ethics Committee
- C. If the risk manager deems it appropriate, he / she should send a copy of the original report to the CEO
- D. The risk manager has submitted the report to their direct supervisor and their obligation ends at this point, nothing further should be done
Answer: B
NEW QUESTION # 56
The "Renewing the Dream" program signed into law by President George W Bush in 2002 was designed to
- A. Recapitalise Fannie Mae and Freddie Mac with US$2.4 billion of additional capital to ensure they weathered the risks associated with any future downturn in the housing markets
- B. Provide grants of US$800 million to help home buyers with down-payment and closing costs
- C. Provide tax credits of nearly US$2.4 billion over the next 5 years to investors and builders who developed affordable single-family housing in poor and distressed areas
- D. Allow risky, high-cost loans to be credited towards affordable housing goals
Answer: C
NEW QUESTION # 57
The retrocession insurance cover was provided by
- A. The fronting insurance companies
- B. Fortress Re and other insurers
- C. The Fortress Re reinsurers only
- D. Fortress Re and their reinsurers
Answer: C
NEW QUESTION # 58
When local rules and regulations conflict with the PRMIA Standards of Best Practice, Conduct and Ethics the PRMIA member should ...
- A. Respect local rules and regulations
- B. Seek advice from a qualified party, being mindful of legal and confidentiality requirements
- C. Modify the interpretation of local rules and regulations to meet the situation
- D. Ignore local rules and regulations
Answer: B
NEW QUESTION # 59
Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:
I competitive market conditions
II ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders III ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators IV reporting all such personnel to the local regulator
- A. II, III and IV only
- B. All of the above
- C. I and II only
- D. I, II and IV only
Answer: C
NEW QUESTION # 60
The problems in the Orange County case can best be characterized as failures related to:
- A. Credit Risk
- B. All of the Above
- C. Operational and Regulatory Compliance Risk
- D. Market Risk
Answer: D
NEW QUESTION # 61
MGRM's losses due to "stacking" started to increase when
- A. the oil market went from weak backwardation to strong backwardation
- B. the oil market went from strong contango to weak contango
- C. the oil market went from contango to backwardation
- D. the oil market went from backwardation to contango
Answer: D
NEW QUESTION # 62
Which of the following was a key problem in the Barings Bank case?
- A. The different time zones that the office was trading in
- B. Having the back office and front office operations under the same person
- C. Leeson was executing an arbitrage strategy even though he was not authorized to do so
- D. Difference in the contract sizes in the OSE and SIMEX
Answer: B
NEW QUESTION # 63
How much of Washington Mutual's assets were funded by customer deposits for the decade ending in 2006?
- A. 60%
- B. 50%
- C. 30%
- D. 40%
Answer: A
NEW QUESTION # 64
Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:
I.competitive market conditions
II.ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders
III.ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators
IV.reporting all such personnel to the local regulator
- A. II, III and IV only
- B. All of the above
- C. I and II only
- D. I, II and IV only
Answer: C
NEW QUESTION # 65
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. All of these are responsibilities of Board and Audit Committees
- D. I, II and III only
Answer: C
NEW QUESTION # 66
The "Renewing the Dream" program signed into law by President George W Bush in 2002 was designed to
- A. Recapitalise Fannie Mae and Freddie Mac with US$2.4 billion of additional capital to ensure they weathered the risks associated with any future downturn in the housing markets
- B. Provide grants of US$800 million to help home buyers with down-payment and closing costs
- C. Provide tax credits of nearly US$2.4 billion over the next 5 years to investors and builders who developed affordable single-family housing in poor and distressed areas
- D. Allow risky, high-cost loans to be credited towards affordable housing goals
Answer: C
NEW QUESTION # 67
The retrocession insurance cover was provided by
- A. The fronting insurance companies
- B. Fortress Re and other insurers
- C. The Fortress Re reinsurers only
- D. Fortress Re and their reinsurers
Answer: C
NEW QUESTION # 68
The Chair, Vice Chair, Secretary and Treasurer of the PRMIA Board of Directors are elected by:
- A. The Regional Directors
- B. A two-thirds affirmative vote of all members
- C. The Blue Ribbon Advisory Panel
- D. All PRMIA Fellow Members
Answer: A
NEW QUESTION # 69
MGRM's losses due to "stacking" started to increase when
- A. the oil market went from weak backwardation to strong backwardation
- B. the oil market went from strong contango to weak contango
- C. the oil market went from contango to backwardation
- D. the oil market went from backwardation to contango
Answer: D
NEW QUESTION # 70
PwC concluded that the accounting policy adopted by China Aviation Oil was incorrect because it
- A. only took into account the time value of the option (which includes recognizing the time left to maturity of the option, the volatility of the spot price of the underlying commodity, interest rates and other factors)
- B. only regarded the intrinsic value (i.e. the difference between the strike price and the forward price of the underlying commodity) as the fair value of its options
- C. used neither the intrinsic value nor the time value
- D. took into account both the intrinsic value and the time value
Answer: B
NEW QUESTION # 71
According to the Group of 30 Report, option contracts:
- A. Usually create credit risk only for the seller (to default by the buyer)
- B. Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation
- C. Create no credit risk, since the buyer need not exercise the option
- D. Always generate credit risk to both counterparties
Answer: B
NEW QUESTION # 72
When considering the performance of Northern Rock within its peer group of banks, which of the following is not correct?
- A. For many years it was regarded as a star-performer in the financial markets.
- B. Its' loan loss record was poor by industry standards.
- C. Only a few months previously it had reported record profits.
- D. The quality of its' assets was never in question.
Answer: B
NEW QUESTION # 73
Which US regulatory authority resolved the restructuring of Washington Mutual?
- A. The Federal Reserve Bank
- B. None of the above
- C. Federal Deposit Insurance Corporation
- D. The Office of Thrift Supervision
Answer: D
NEW QUESTION # 74
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