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PRMIA Operational Risk Manager (ORM) Sample Questions:

1. Which of the following statements are true ?
I.Risk governance structures distribute rights and responsibilities among stakeholders in the corporation II. Cybernetics is the multidisciplinary study of cyber risk and control systems underlying information systems in an organization III. Corporate governance is a subset of the larger subject of risk governance IV. The Cadbury report was issued in the early 90s and was one of the early frameworks for corporate governance

A) I, II and IV
B) II and III
C) I and IV
D) All of the above


2. The Options Theoretic approach to calculating economic capital considers the value of capital as being equivalent to a call option with a strike price equal to:

A) The market value of the debt
B) The value of the firm
C) The value of the assets
D) The notional value ofthe debt


3. Which of the following formulae describes CVA (Credit Valuation Adjustment)? All acronyms have their usual meanings (LGD=Loss Given Default, ENE=Expected Negative Exposure, EE=Expected Exposure, PD=Probability of Default, EPE=Expected Positive Exposure, PFE=Potential Future Exposure)

A) LGD * EPE * PD
B) LGD * EE * PD
C) LGD * PFE * PD
D) LGD * ENE * PD


4. Which of the following statements are correct:
I. A training set is a set of data used to create a model, while a control set is a set of data is used to prove that the model actually works II. Cleansing, aggregating or ensuring data integrity is a task for the IT department, and is not a risk manager's responsibility III. Lack of information on the quality of underlying securities and assets was a major cause of the collapse in the CDO markets during the credit crisis that started in 2007 IV. The problem of lack of historical data can be addressed reasonably satisfactorily by using analytical approaches

A) I and III
B) I, III and IV
C) All of the above
D) II and IV


5. When compared to a high severity low frequency risk, the operational risk capital requirement for a low severity high frequency risk is likely to be:

A) Unaffected by differences in frequency or severity
B) Lower
C) Zero
D) Higher


Solutions:

Question # 1
Answer: C
Question # 2
Answer: D
Question # 3
Answer: A
Question # 4
Answer: A
Question # 5
Answer: B

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