Principles of Risk Management
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Questions and Answers

What is one of the weaknesses identified in the text regarding risk management?

  • Global vision of risk being applied effectively
  • Lack of involvement from senior management in stress analysis programs (correct)
  • Adequate tools available for crisis management
  • Overreliance on stress analysis in separate businesses

    • What is recommended for senior management in the stress analysis process?

  • Application of conclusions in strategic decisions (correct)
  • Limited involvement to avoid decision-making bias
  • No need for senior management to be part of the process
  • Avoiding maintenance and development of the program

    • What is a key aspect that the stress program should cover, as mentioned in the text?

  • Risk identification and management (correct)
  • Avoiding decisions on capital allocation and liquidity management
  • Internal information not being a part of the program
  • Limiting stress techniques to sensitivities only

    • Why is it essential to have cushions in case of a liquidity crisis?

    <p>To ensure an adequate survival horizon</p> Signup and view all the answers

    What is one of the recommendations for management and intermediate managers regarding the stress testing program?

    <p>Maintenance, development, and review of the program</p> Signup and view all the answers

    Which aspect of risk management lacks global vision according to the text?

    <p>Application of stress analysis programs in separate businesses</p> Signup and view all the answers

    What is the primary objective of Asset-Liabilities Management (ALM) in financial institutions?

    <p>Maximizing profit between assets and liabilities</p> Signup and view all the answers

    Which of the following is NOT a part of the ALM function in financial institutions?

    <p>Approval process of limits</p> Signup and view all the answers

    What are the fundamental methodologies used to address the measurement of different risk factors in the financial field?

    <p>4 perspectives</p> Signup and view all the answers

    Which aspect is NOT considered in the strategic management of the balance sheet from the perspective of market and liquidity risks?

    <p>Maximizing shareholder value</p> Signup and view all the answers

    In Asset-Liabilities Management (ALM), what is part of complying with banking regulations?

    <p>Reporting</p> Signup and view all the answers

    What does the ALM function affect in financial institutions?

    <p>Institutions with balance sheet risks from credit operations only</p> Signup and view all the answers

    What is the body responsible for defining and managing the global risks of a financial institution?

    <p>Asset Liabilities Committee (ALCO)</p> Signup and view all the answers

    Which organizational structure is desirable for the direct reporting of the risk function?

    <p>Reporting to the Presidency and/or Board of Directors</p> Signup and view all the answers

    What is crucial for the proper development of the risk function?

    <p>Allocation of resources</p> Signup and view all the answers

    What is an important aspect in organizing the functions within an entity?

    <p>Segregation of functions</p> Signup and view all the answers

    What is one of the most important binding frameworks in the risk function?

    <p>Establishing limits consistent with risk appetite</p> Signup and view all the answers

    What outlines the risk organization structure as the 3 lines of defense?

    <p>Asset Liabilities Committee (ALCO)</p> Signup and view all the answers

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