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PRMIA 8009 Exam Syllabus Topics:

SectionObjectives
Topic 1: Ethics in Risk Management- Ethical decision-making in financial risk scenarios
- Conflict of interest management
- Professional ethics and conduct standards
Topic 2: Governance- Corporate governance structures
- Internal controls and compliance systems
- Board responsibilities and oversight
Topic 3: Risk Management Standards- Global risk management frameworks
- Regulatory and industry standards
Topic 4: Best Practices in Risk Management- Enterprise risk management implementation
- Risk monitoring and reporting
- Risk identification and assessment processes

PRMIA Exam IV: Case Studies: Standards: Governance, Best Practices and Ethics - 2015 Edition Sample Questions:

Question #1

A risk manager is asked to analyze the credit risk of a convertible bond. The risk manager has never analyzed convertible bonds, but does have significant expertise in credit risk. The risk manager accepts the assignment, finds a paper on the subject through the PRMIA web site and copies the method used there. The risk manager completes the assignment and delivers a report to his or her direct supervisor and the supervisor is quite pleased.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), this was acceptable behavior if the following conditions were met:
I. The risk manager disclosed the lack of knowledge about convertible bonds II. The methodology employed is disclosed and explained III. The report was just to be used for analysis and not in practice IV. The risk manager was sure of his/her understanding of the paper found on the web

  • A. I, II and IV
  • B. I, II and III
  • C. I and II
  • D. I only
Reveal Solution  Discussion  0

Correct Answer: C  🗳️

Question #2

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

  • A. 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
  • 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 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
  • D. 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
Reveal Solution  Discussion  0

Correct Answer: B  🗳️

Question #3

The multi-dimensional risk problem at Northern Rock did not include which one of the combinations of the following?

  • A. Business Model; Corporate Governance; Moral Hazard; and Deposit Protection
  • B. Corporate Governance; Moral Hazard; Role of Government; and Credit Risk
  • C. Deposit Protection; Moral Hazard; Business Model; and LPHI Risk
  • D. LPHI Risk; Business Model; Solvency vs. Liquidity: and Deposit Protection
Reveal Solution  Discussion  0

Correct Answer: B  🗳️

Question #4

According to the PwC report China Aviation Oil, in order to avoid recording and reporting losses, the company adopted which approach covering up its losses?

  • A. selling short-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
  • B. selling long-term options with extremely high-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
  • C. selling short-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
  • D. selling long-term options with extremely low-risk profiles to generate premiums to cover the cost of closing out loss-making option positions
Reveal Solution  Discussion  0

Correct Answer: B  🗳️

Question #5

The Bankers Trust Case Study is about:

  • A. failure to guard its clients' best interests
  • B. reliance on thinly traded derivatives to hedge
  • C. large losses at the proprietary trading desk
  • D. overexposure to the real estate market
Reveal Solution  Discussion  0

Correct Answer: A  🗳️

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