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Risk Management Strategies in Financial Institutions

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Risk Management Strategies in Financial Institutions

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Questions and Answers

What is the primary reason for Financial Institutions to implement regular risk monitoring systems?

To eliminate risks identified and accepted

To reduce the impact of high-impact risk events (correct)

To accurately forecast the future

To shift the burden of risk consequence to another party

What is the goal of a control strategy in risk mitigation?

To completely eliminate risks

To transfer risk to another party

To increase the risk appetite

To reduce or eliminate the impacts of identified risks (correct)

What is a conventional means to transfer risk to another organization?

Risk mitigation

Risk monitoring

Risk assessment

Purchasing insurance (correct)

What is the potential pitfall of basing risk acceptance decisions on estimates or predictions?

The information may not accurately forecast the future Signup and view all the answers

What is the relationship between risk identification and control strategy?

Risk identification is a prerequisite for control strategy Signup and view all the answers

What is the primary goal of risk management in a financial institution?

To minimize the cause of a recognized risk event Signup and view all the answers

What is inherent risk in the context of banking?

The uncertainty that surrounds future events and outcomes Signup and view all the answers

What is the term for the level of risk remaining after applying risk controls?

Residual risk Signup and view all the answers

What influences the nature and extent of risk management activities in a financial institution?

Risk appetite Signup and view all the answers

What is the process of identifying risk areas and estimating the probability of a risk occurrence?

Risk identification Signup and view all the answers

What can effective mitigation strategies and controls achieve?

Reduce adverse risks (threats) or increase opportunities Signup and view all the answers

What is the primary purpose of a Key Risk Indicator?

To provide early warning of potential risk adverse effects Signup and view all the answers

What is the term used to describe the likelihood of a risk occurring?

Probability Signup and view all the answers

What is the purpose of a Risk Register?

To identify and prioritize risks for remediation Signup and view all the answers

What is the term used to describe the potential losses or consequences of a risk occurring?

Impact Signup and view all the answers

What is the purpose of a Remediation Strategy?

To develop and implement policies to control risk Signup and view all the answers

What is the term used to describe an organization's willingness to accept or take on risk?

Risk Appetite Signup and view all the answers