Question

37. Which of the following will help you separate key risks from normal risks?

A. Key risks have poor operational effectiveness of controls

B. Key risks have poor design effectiveness of controls

C. Key risks have high value of inherent risk score from likelihood and impact

D. Key risks have low value of inherent risk score from likelihood and impact

The correct answer is ___

38. Which of the following characteristics does NOT help identify key controls?

A. Key controls are cost effective

B. Key controls mitigate key risks

C. Key controls mitigate multiple numbers of risks

D. Key controls mitigate multiple numbers of key risks

The correct answer is ___

39. Which of the following is INCORRECT regarding risk indicators?

A. preventive controls are leading indicators

B. detective controls are lagging indicators

C. corrective controls are lagging indicators

D. directive controls are lagging indicators

The correct answer is ___

40. Why BASEL II accord does not allow buying insurance as alternative for capital requirement for operational risks management?

A. It is difficult to determine insurance requirements in operational risk management

B. Insurance has counter party risk for payment settlement

C. Insurance companies will not cover operational risk

D. Capital requirements are more cost effective than insurance premiums

Answer 1

Answer 37: Option C.

Below mentioned option will help us separate key risks from normal risks as

C. Key risks have high value of inherent risk score from likelihood and impact

The correct answer is option C. because the separation of the key risks from the normal risk will be based on the inherent risk score from likelihood and impact in the system.

Answer 38 : Option A.

Below mentioned characteristics does NOT help identify key controls is option A i.e.

A. Key controls are cost effective, so the the correct answer is “Key controls are cost effective” because cost effective does not help in identifying the key controls in the system.

Answer 39: Option D

Below mentioned option is INCORRECT regarding risk indicators?

D. directive controls are lagging indicators

The correct answer is Option D, because the directive controls are leading indicators and not lagging indicators. The directive indicators work in preventive mode, rather than reactive mode.

Answer 40: Option D

BASEL II accord does not allow buying insurance as alternative for capital requirement for operational risks management because option D - Capital requirements are more cost effective than insurance premiums. Capital requirement cannot be fulfilled by insurance option.