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P2.T7.305. Operational risk tools (ERM)




305.1. Each of the following is accurate about a Risk Appetite Framework (RAF), according to the Senior Supervisors Group, EXCEPT which is not accurate?

a. An RAF establishes an explicit, forward-looking view of a firm’s desired risk profile in a variety of scenarios and sets out a process for achieving that risk profile
b. A risk profile is a point-in-time assessment of actual aggregate risks associated with a firm's exposures and business activities
c. Risk appetite is the level and type of risk a firm is able and willing to assume in its exposures and business activities, given its business objectives and obligations to stakeholders
d. Risk capacity is the risk measurement domain engendered by the IT infrastructure ("what cannot be measured cannot be managed")

305.2. According to the Basel model for operational risk governance, "common industry practice for sound operational risk governance often relies on three lines of defense." Which of the following is not really one of the three lines of defense against operational risk?

a. Board of directors
b. Business line management
c. Corporation operational risk function (CORF)
d. Independent review

305.3. Stress testing has become an extremely popular, if not the de facto, tool for assessing both economic and regulatory capital adequacy. According to Schuermann, each of the following is true about stress testing EXCEPT for:

a. A key problem (challenge) is mapping from a few macro risk factors to many more intermediate risk factors; e.g., geographic heterogeneity
b. A key lesson from the crisis was that banks should NOT be allowed to develop their own internal, adverse scenarios: reliable comparability requires uniformity of the scenario
c. Coherence is a problem that tends to increase in high dimensional, multi-factor scenarios that include both real and financial factors
d. One solution to the "coherence problem" is to employ historical scenarios, although these have the drawback that they may not anticipate the future


David Harper CFA FRM

David Harper CFA FRM
Staff member
Hi chiyui, since you've been so generous with your contributions, the least i can do is say: yes, that is correct ;)


Hi chiyui, since you've been so generous with your contributions, the least i can do is say: yes, that is correct ;)
Yeah~I got it right~XD
Well, I'm a beginner only and I feel not very confident to myself to be frank. So I can just discuss what I know about and that's very limited. I found there're many talented people in this forum indeed.