PRMIA PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics Sample Questions:

1. According to the Northern Rock Case Study, what is Forced Insolvency?

A) The bank is solvent in that the current value of its assets (measured at book value) is more than the value of its liabilities; so even if the bank were to liquidate all of its assets it would be able to repay all depositors and other creditors
B) The bank is legally solvent but if, because it cannot fund its operations, it is forced to liquidate assets it could do so only at less than nominal values (fire sale) and this would make it legally insolvent (value of assets falls below those of liabilities)
C) The bank is legally solvent but its current funding costs (which are likely to continue) exceed the average rate of return on its assets and hence it would soon become insolvent as it would be making losses and would eventually exhaust its equity capital
D) The bank is insolvent in that the current value of its assets (measured at book value) is less than the value of its liabilities; thus even if the bank were to liquidate all of its assets it would not be able to repay all depositors and other creditors

2. According to the G-30 Study, the risk management infrastructure's funding must be

A) determined at the Board level with inputs from business unit leaders
B) determined by the regulators
C) determined at the Board level without influence by business unit leaders
D) determined by business-unit leaders

3. The Chief Risk Officer is responsible for the management of the Risk Management Infrastructure, and as such helps the Board define, and then implements throughout the organization, the risk appetite of the organization.
Which of the following is also the responsibility of the Chief Risk Officer?

A) Ensures that reporting of risk and governance-related matters are produced in a timely and accurate manner
B) Maintaining appropriate assurance measures to ensure that the Governance and Risk framework of the organization is effective, and, if any shortcomings are discovered, to escalate these to the Board so that remedial action can be taken in an appropriate and timely manner
C) Acts as sponsor for risk throughout the organization and ensures that a risk culture is implemented, and maintained
D) ensuring that all employees understand the rules and regulations (both internal and external) with which they must comply and the implications, for them and for the organization, of non-compliance

4. Which of the following are PRMIA Governance Principles?
I Sufficiency of Key Resources and Process
II State of the Art Risk Management Technology
III Ongoing Education and Discernment
IV Sufficiency of Key Competencies

A) All of these are PRMIA Governance Principles
B) I and II only
C) I, II and IV only
D) I, III and IV only

5. With a PRMIA member's need to reconcile their internal and external responsibility to perform their work in an independent and appropriate fiduciary manner, which of the following options must be taken into consideration when performing risk management duties?

A) Internal controls, and the expectations of stakeholders, shareholders, and the general public
B) Internal controls of the organization, and the local regulator
C) Only the internal controls and compliance standards
D) The local regulator, internal controls, and shareholders

Solutions: