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Details |
| Topic 1 |
- 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.
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| Topic 2 |
- 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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| 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.
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| Topic 4 |
- 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.
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| 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.
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PRMIA ORM Certificate - 2023 Update Sample Questions (Q55-Q60):
NEW QUESTION # 55
An example of Credit Risk events with an Operational Risk component included?
- A. Ponzi Schemes.
- B. Failure in loan approval process leading to erroneously approved loans.
- C. Rogue Trading.
- D. Ponzi Schemes & Rogue Trading.
Answer: D
Explanation:
Step 1: Understanding Credit Risk with an Operational Risk Component
Credit Risk: Risk of loss due to borrower default.
Operational Risk: Risk of loss due to failed internal processes, fraud, or misconduct.
Step 2: Why Option D is Correct
Ponzi Schemes: Fraudulent investment scams disguise credit risk as legitimate lending but collapse when new funds dry up.
Rogue Trading: Traders take unauthorized risks that can lead to credit defaults or massive financial losses.
Step 3: Why the Other Options Are Incorrect
Option A ("Failure in loan approval process") → This is an Operational Risk issue, but does not always create Credit Risk.
Option B ("Ponzi Schemes") → Partially correct, but does not include Rogue Trading, which is also a credit risk-related operational failure.
Option C ("Rogue Trading") → Partially correct, but does not include Ponzi Schemes, which are another key example.
PRMIA Risk Reference Used:
PRMIA Operational Risk Framework - Highlights fraud-based Credit Risk events.
Basel II/III Operational Risk Guidelines - Discusses trading misconduct and credit risk misrepresentation.
Final Conclusion:
Both Ponzi Schemes and Rogue Trading involve credit risk failures caused by operational misconduct, making Option D the correct answer.
NEW QUESTION # 56
Which of the following best describes the role of the compliance department?
- A. The compliance department is responsible for providing oversight over the board's implementation of compliance risk management controls.
- B. The compliance department is responsible for providing oversight over the first line's implementation of compliance risk management controls.
- C. The compliance department is responsible for providing oversight over the auditor's implementation of compliance risk management controls.
- D. The compliance department is responsible for implementing the first line's compliance risk management controls.
Answer: B
Explanation:
Three Lines of Defense Model
The compliance department functions as the second line of defense, ensuring oversight over the first line's compliance controls.
It does not directly implement controls but monitors and advises on compliance risk management.
Responsibilities of the Compliance Department
Ensures regulatory compliance with laws, policies, and industry standards.
Monitors and enforces risk management controls within business operations.
Provides advisory and training on compliance risks.
Why Answer D is Correct
The first line of defense (business operations) is responsible for executing compliance controls.
The compliance department (second line) provides oversight and governance to ensure compliance adherence.
Why Other Answers Are Incorrect
Option
Explanation:
A . The compliance department is responsible for implementing the first line's compliance risk management controls.
Incorrect - The first line (business units) implement compliance controls, while compliance oversees.
B . The compliance department is responsible for providing oversight over the auditor's implementation of compliance risk management controls.
Incorrect - Internal audit is part of the third line of defense, not directly overseen by compliance.
C . The compliance department is responsible for providing oversight over the board's implementation of compliance risk management controls.
Incorrect - The board provides high-level governance; compliance ensures business adherence to regulations.
PRMIA Reference for Verification
PRMIA Governance & Compliance Oversight Framework
Basel Committee's Guidelines on Compliance Risk Management
NEW QUESTION # 57
In operational resilience, what is impact tolerance?
- A. Impact tolerance is a firm's tolerance for disruption to a particular business process.
- B. Impact tolerance is a firm's tolerance for disruption to a particular business service.
- C. Impact tolerance is a firm's risk capacity statement.
- D. Impact tolerance is a firm's risk appetite statement.
Answer: B
Explanation:
Impact Tolerance is a key concept in Operational Resilience, defined as the ability of a firm to withstand, respond to, and recover from disruptions. According to PRMIA and global regulatory frameworks (such as the Bank of England's Operational Resilience Framework), impact tolerance is specifically tied to business services rather than processes.
Step 1: Defining Impact Tolerance
Impact tolerance is the maximum acceptable level of disruption to an important business service, beyond which there would be intolerable harm to customers, financial markets, or regulatory obligations.
It is not the same as risk appetite or risk capacity, as those deal with broader organizational risk exposure.
Step 2: Why Business Services Matter
PRMIA defines business services as end-to-end services delivered to clients and stakeholders, such as payments processing, trade execution, or loan approvals.
Disruptions to these services directly impact customers and financial stability, making business service resilience the core focus of impact tolerance.
Step 3: Why the Other Options Are Incorrect
Option A ("tolerance for disruption to a particular business process")
Incorrect because impact tolerance applies to services, not just internal processes.
Option C ("a firm's risk appetite statement")
Incorrect because risk appetite focuses on how much risk a firm is willing to take, while impact tolerance is about surviving disruptions.
Option D ("a firm's risk capacity statement")
Incorrect because risk capacity is the maximum level of risk a firm can bear, which is broader than business service disruptions.
PRMIA Risk Reference Used:
PRMIA Operational Resilience Guidelines - Defines impact tolerance as a service-based metric.
Bank of England's Operational Resilience Framework - Establishes impact tolerance as a limit on business service disruption.
Final Conclusion:
Impact tolerance focuses on business services, not just internal processes or risk appetite, making Option B the correct answer.
NEW QUESTION # 58
Ideally, which of the following should be completed as part of the risk assessments of service providers?
- A. An assessment of a third party should not include its compliance and risk infrastructure, financials, business strategy and operating history.
- B. Onsite visits are not advantageous for understanding the third party's risks and control environment.
- C. An assessment of a third party should include its compliance and risk infrastructure, financials, business strategy and operating history.
- D. A review of the pay levels of the staff supporting the service.
Answer: C
Explanation:
Third-Party Risk Management (TPRM)
PRMIA highlights the importance of conducting thorough due diligence on third-party vendors and service providers.
This includes evaluating compliance programs, risk management frameworks, financial stability, strategic objectives, and operational history.
Key Areas of Third-Party Risk Assessment
Compliance and Risk Infrastructure → Ensures that the provider meets regulatory and security requirements.
Financial Health → Determines whether the provider has the financial stability to support long-term service delivery.
Business Strategy → Helps assess alignment with the organization's risk appetite and goals.
Operating History → Evaluates experience and reliability in delivering services.
Why Other Answers Are Incorrect
Option
Explanation:
B . An assessment of a third party should not include its compliance and risk infrastructure, financials, business strategy, and operating history.
Incorrect - Ignoring these critical factors increases the risk of working with an unreliable vendor.
C . Onsite visits are not advantageous for understanding the third party's risks and control environment.
Incorrect - Onsite visits are highly valuable as they provide first-hand insights into operational controls. PRMIA encourages risk managers to conduct site visits.
D . A review of the pay levels of the staff supporting the service.
Incorrect - Employee salaries are not a primary risk factor in vendor assessments. The focus should be on the vendor's security, compliance, and operational risks.
PRMIA Reference for Verification
PRMIA Third-Party Risk Management (TPRM) Guidelines - Details best practices for vendor risk assessments.
Basel Principles on Outsourcing and Third-Party Risk - Provides regulatory guidance on evaluating third-party service providers.
NEW QUESTION # 59
Risk Capacity for a bank is defined as the:
- A. Ability to withstand an extreme event and make a profit.
- B. Ability to suffer an extreme event with an orderly wind up with only shareholders losing money.
- C. Amount of risk the regulator sets for the bank.
- D. Amount of risk the bank wishes to take.
Answer: B
Explanation:
Step 1: Definition of Risk Capacity
Risk Capacity refers to the maximum level of risk a bank can absorb while still maintaining orderly operations or, in extreme cases, conducting an orderly resolution.
PRMIA and Basel III define risk capacity as a bank's ability to absorb losses in a crisis without systemic consequences.
Step 2: Why Option D Is Correct
The ultimate test of a bank's risk capacity is whether it can survive an extreme shock without harming depositors or financial markets.
Regulators ensure that a bank can be wound up in an orderly manner so that only shareholders lose money, while depositors and creditors remain protected under resolution planning frameworks.
Step 3: Why the Other Options Are Incorrect
Option A ("Amount of risk the bank wishes to take")
Incorrect because this describes Risk Appetite, not Risk Capacity.
Option B ("Amount of risk the regulator sets for the bank")
Incorrect because regulators set capital requirements, but the bank's actual risk capacity is based on its own capital structure and business model.
Option C ("Ability to withstand an extreme event and make a profit")
Incorrect because risk capacity is about survival, not profit-making during extreme events.
PRMIA Risk Reference Used:
Basel III Risk Capacity Standards - Defines the ability to absorb losses during crises.
PRMIA Risk Governance Framework - Describes how banks should manage risk capacity through capital buffers.
Final Conclusion:
Banks must be able to withstand an extreme event and conduct an orderly wind-up if necessary, ensuring that only shareholders bear the loss, making Option D the correct answer.
NEW QUESTION # 60
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