Principles of Risk Management

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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?

To ensure an adequate survival horizon Signup and view all the answers

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

Maintenance, development, and review of the program Signup and view all the answers

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

Application of stress analysis programs in separate businesses Signup and view all the answers

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

Maximizing profit between assets and liabilities Signup and view all the answers

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

Approval process of limits Signup and view all the answers

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

4 perspectives 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?

Maximizing shareholder value Signup and view all the answers

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

Reporting Signup and view all the answers

What does the ALM function affect in financial institutions?

Institutions with balance sheet risks from credit operations only Signup and view all the answers

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

Asset Liabilities Committee (ALCO) Signup and view all the answers

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

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

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

Allocation of resources Signup and view all the answers

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

Segregation of functions Signup and view all the answers

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

Establishing limits consistent with risk appetite Signup and view all the answers

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