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PRMIA ORM Certificate - 2023 Update Sample Questions (Q20-Q25):

NEW QUESTION # 20
Process mapping is:

A. A good visualization tool for understanding where hand-offs and hand-ins may occur.
B. A useful tool for understanding process intensive activities.
C. A helpful tool for understanding where control gaps may exist.
D. All of the above.

Answer: D

Explanation:
Process Mapping is a risk management tool used to visualize workflows, identify inefficiencies, and detect control gaps. PRMIA defines process mapping as an essential operational risk management tool.
Step 1: Understanding Process Mapping
Helps analyze complex, process-intensive activities (Option A).
Reveals control weaknesses that could lead to operational risks (Option B).
Improves hand-offs and collaboration between teams (Option C).
Step 2: Why "All of the Above" is Correct
Process mapping serves multiple risk management purposes, making all listed options valid.
PRMIA Risk Reference Used:
PRMIA Operational Risk Management Guidelines - Recommends process mapping to identify inefficiencies and control gaps.
PRMIA Risk Governance Framework - Encourages visualization tools for process improvement.
Final Conclusion:
Process mapping improves risk awareness, identifies control gaps, and enhances operational workflows, making Option D the correct answer.

NEW QUESTION # 21
For credit risk losses containing operational risk elements that have been historically included in an organizations' credit risk database how should the loss amount be treated?

A. The entire loss amount is treated as credit risk, but the loss is entered as a memorandum within the operational loss database and not used for capital modeling purposes.
B. The entire loss amount is treated as credit risk
C. The loss amount is split into credit and operational risk components.
D. The entire loss amount is treated as operational risk.

Answer: C

Explanation:
Understanding Credit Risk and Operational Risk Overlap
In some cases, credit risk losses contain elements of operational risk, such as fraud, documentation errors, or IT failures affecting credit transactions.
Basel II and III frameworks require institutions to distinguish between pure credit risk losses and operational risk components within those losses.
Treatment of Losses
The credit-related portion is accounted for under credit risk capital calculations.
The operational risk portion (e.g., fraud-related losses) should be classified separately and included in operational risk databases for risk measurement.
Why Answer C is Correct
Basel III and PRMIA recommend a clear split between credit risk and operational risk components to ensure accurate risk modeling.
If operational risk elements are ignored, an organization may underestimate its true operational risk exposure.
Why Other Answers Are Incorrect
Option
Explanation:
A . The entire loss amount is treated as credit risk.
Incorrect - This ignores operational risk components that should be accounted for separately.
B . The entire loss amount is treated as operational risk.
Incorrect - Credit risk losses are typically dominant in lending-related losses and should not be fully classified as operational risk.
D . The entire loss amount is treated as credit risk, but the loss is entered as a memorandum within the operational loss database and not used for capital modeling purposes.
Incorrect - The operational risk portion must be considered for capital modeling, not just recorded as a memo.
PRMIA Reference for Verification
Basel II & III Guidelines on Credit and Operational Risk Integration
PRMIA Operational Risk Framework

NEW QUESTION # 22
In relation to the template for writing policy documents, which one of the following pairings of requirements is correct? A well designed policy will include:

A. To whom and in what form exceptions should be sought and the general exemptions e.g. areas to which the policy does not apply
B. A list of acceptable fonts and margin types.
C. To whom the policy applies to and how an additional management report should be allocated to.
D. A list of exceptions for the family of board members.

Answer: A

Explanation:
Step 1: Key Elements of a Well-Designed Policy Document
A well-designed policy should include:
Scope - Who the policy applies to.
Exception Handling - How and where exceptions should be requested.
Accountability - Who is responsible for enforcement.
Step 2: Why Option C is Correct
A policy must clearly define exceptions and the process for requesting them.
It should also define areas where the policy does not apply to avoid confusion.
Step 3: Why the Other Options Are Incorrect
Option A ("List of exceptions for board members' families") → Incorrect because policies should apply consistently to all stakeholders.
Option B ("List of acceptable fonts and margin types") → Incorrect because formatting is secondary to content clarity.
Option D ("To whom the policy applies and an additional management report") → Incorrect because policy scope should not include unnecessary reports.
PRMIA Risk Reference Used:
PRMIA Policy Writing Guidelines - Defines policy structure and exception handling.
ISO 19600 Compliance Management Standard - Supports clear, well-documented policies.
Final Conclusion:
A well-designed policy clearly defines exceptions and their handling process, making Option C the correct answer.

NEW QUESTION # 23
Which of the following statements is best for inclusion in the values to be set for a Risk Function?

A. We prize the ability to ensure that the Risk Function's opinions are listened to and acted upon.
B. We prize the ability to lower risk-taking to an absolute minimum - zero if possible.
C. We prize the ability to implement the management team's direction on the control of risks.
D. We prize the ability to implement the board's direction on the implementation of controls for risks.

Answer: D

Explanation:
Step 1: Role of a Risk Function
A Risk Function ensures that an organization follows best practices in risk governance, assessment, and control implementation.
It should be aligned with the board's risk strategy and ensure independent oversight.
Step 2: Why Option B is Correct
The board sets the overall risk strategy, and the risk function implements risk controls accordingly.
PRMIA emphasizes board oversight as the guiding force behind risk management.
Step 3: Why the Other Options Are Incorrect
Option A ("Implement management's direction") → Incorrect because risk oversight should be board-driven, not solely management-driven.
Option C ("Ensure opinions are listened to") → Incorrect because risk functions enforce policies, not just share opinions.
Option D ("Lower risk-taking to zero") → Incorrect because risk-taking is necessary for growth-excessive risk aversion harms business.
PRMIA Risk Reference Used:
PRMIA Risk Governance Framework - Highlights board oversight in risk management.
Basel III Risk Management Standards - Emphasizes board-driven risk controls.
Final Conclusion:
The Risk Function must follow the board's direction in implementing risk controls, making Option B the correct answer.

NEW QUESTION # 24
Team supervisors are key in the development and maintenance of the risk culture because they are:

A. Visible to regulators and can describe the firm's risk culture to inspection teams.
B. More experienced than the employees that report to them.
C. Connected with every employee, every day, and can ensure desired behaviors are followed by all.
D. Visible to regulators and can describe the firm's risk culture to their board.

Answer: C

Explanation:
Team supervisors play a critical role in shaping and maintaining an organization's risk culture. PRMIA's Risk Governance Framework and Risk Culture Principles emphasize that supervisors act as the link between risk policies and frontline employees, ensuring that risk-aware behaviors are consistently followed.
Step 1: Role of Supervisors in Risk Culture Development
Supervisors engage with employees daily, providing guidance on risk-based decision-making.
They reinforce risk policies, standards, and expectations set by senior management.
Supervisors identify behavioral trends that may indicate risk culture weaknesses.
Step 2: Supervisors as Enforcers of Risk Culture
PRMIA's Risk Culture Framework stresses that risk culture must be embedded into daily operations through supervisor-led enforcement.
Supervisors monitor, correct non-compliant behaviors, and provide ongoing risk awareness training.
Their proximity to employees allows them to detect early warning signs of risk issues.
Step 3: Why the Other Options Are Incorrect
Option A: "More experienced than the employees that report to them."
Experience alone does not establish or maintain a risk culture.
A risk culture is about behaviors and practices, not just expertise.
Option B: "Visible to regulators and can describe the firm's risk culture to inspection teams." While supervisors may interact with regulators, their primary role is to engage with employees daily rather than acting as spokespersons.
Option D: "Visible to regulators and can describe the firm's risk culture to their board." Boards typically rely on Chief Risk Officers (CROs) or senior executives to communicate risk culture, not direct supervisors.
PRMIA Risk Reference Used:
PRMIA Risk Culture Framework - Highlights the role of supervisors in ensuring risk-aware behaviors.
PRMIA Risk Governance Framework - Stresses that frontline supervisors must enforce risk management policies.
PRMIA Risk Awareness Guidelines - Reinforces daily interaction as a key factor in maintaining a strong risk culture.
Final Conclusion:
Supervisors directly influence employees' behaviors and ensure that risk culture is consistently followed, making Option C the correct answer.

NEW QUESTION # 25
......

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Quiz 2025 8020: High Hit-Rate New ORM Certificate - 2023 Update Exam Testking

Free PDF Useful PRMIA - 8020 - New ORM Certificate - 2023 Update Exam Testking

PRMIA ORM Certificate - 2023 Update Sample Questions (Q20-Q25):

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