VALID PRMIA 8020 EXAM GUIDE - 8020 VALID EXAM PASS4SURE

Valid PRMIA 8020 Exam Guide - 8020 Valid Exam Pass4sure

Valid PRMIA 8020 Exam Guide - 8020 Valid Exam Pass4sure

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PRMIA ORM Certificate - 2023 Update Sample Questions (Q11-Q16):

NEW QUESTION # 11
Two of the four key resources that are regarded as critical to maintain confidence and calibrate Risk Appetite to are?

  • A. Net earnings and capital.
  • B. Strong regulatory assessment and net earnings.
  • C. Quality human resources and reputation.
  • D. Capital expenditure and liquidity.

Answer: A

Explanation:
Key Resources for Calibrating Risk Appetite
Risk appetite defines how much risk an organization is willing to accept to achieve its objectives.
Two of the most critical resources for maintaining confidence and setting risk appetite are net earnings and capital.
Why Net Earnings and Capital are Critical
Net earnings reflect profitability and financial stability, influencing risk-taking capacity.
Capital ensures that the institution can absorb losses and meet regulatory requirements.
Basel III emphasizes capital adequacy as a core measure of financial resilience.
Why Answer B is Correct
Net earnings support operational stability, while capital determines how much risk an institution can bear.
Both are used to define and calibrate risk appetite levels.
Why Other Answers Are Incorrect
Option
Explanation:
A . Capital expenditure and liquidity.
Incorrect - Capital expenditure is an investment measure, not a direct risk appetite determinant.
C . Strong regulatory assessment and net earnings.
Incorrect - Regulatory assessments are important but do not directly set risk appetite.
D . Quality human resources and reputation.
Incorrect - HR and reputation are important for governance but do not directly influence risk capital and earnings stability.
PRMIA Reference for Verification
PRMIA Risk Appetite Framework
Basel III Capital and Earnings Management Guidelines


NEW QUESTION # 12
Risk Capacity for a bank is defined as the:

  • A. Amount of risk the bank wishes to take.
  • B. Ability to suffer an extreme event with an orderly wind up with only shareholders losing money.
  • C. Amount of risk the regulator sets for the bank.
  • D. Ability to withstand an extreme event and make a profit.

Answer: B

Explanation:
Step 1: Definition of Risk Capacity
Risk Capacity refers to the maximum level of risk a bank can absorb while still maintaining orderly operations or, in extreme cases, conducting an orderly resolution.
PRMIA and Basel III define risk capacity as a bank's ability to absorb losses in a crisis without systemic consequences.
Step 2: Why Option D Is Correct
The ultimate test of a bank's risk capacity is whether it can survive an extreme shock without harming depositors or financial markets.
Regulators ensure that a bank can be wound up in an orderly manner so that only shareholders lose money, while depositors and creditors remain protected under resolution planning frameworks.
Step 3: Why the Other Options Are Incorrect
Option A ("Amount of risk the bank wishes to take")
Incorrect because this describes Risk Appetite, not Risk Capacity.
Option B ("Amount of risk the regulator sets for the bank")
Incorrect because regulators set capital requirements, but the bank's actual risk capacity is based on its own capital structure and business model.
Option C ("Ability to withstand an extreme event and make a profit")
Incorrect because risk capacity is about survival, not profit-making during extreme events.
PRMIA Risk Reference Used:
Basel III Risk Capacity Standards - Defines the ability to absorb losses during crises.
PRMIA Risk Governance Framework - Describes how banks should manage risk capacity through capital buffers.
Final Conclusion:
Banks must be able to withstand an extreme event and conduct an orderly wind-up if necessary, ensuring that only shareholders bear the loss, making Option D the correct answer.


NEW QUESTION # 13
Risk and compliance functions often work together; which of the following best desribes the issue with a "zero risk appetite"?

  • A. It will result in a compliance investigation conducted by the first line.
  • B. An organization may decide that it will accept a certain level of outstanding compliance issues and thus will breach such an appetite statement.
  • C. It means that there can be a risk self assessment workshop for the compliance department.
  • D. A zero risk appetite is illegal under all known regulations.

Answer: B

Explanation:
Understanding Zero Risk Appetite in Compliance
A zero risk appetite means the organization does not tolerate any compliance breaches.
However, in real-world risk management, it is often impractical to have zero risk exposure.
Some compliance violations may occur despite strong controls, making a strict zero-risk stance unrealistic.
Why Answer C is Correct
If an organization adopts a zero risk appetite for compliance, any compliance issue, even minor ones, would breach this policy.
This contradicts practical risk management, which allows for some residual risk while maintaining controls.
Why Other Answers Are Incorrect
Option
Explanation:
A . A zero risk appetite is illegal under all known regulations.
Incorrect - It is not illegal, but it is impractical in many industries.
B . It means that there can be a risk self-assessment workshop for the compliance department.
Incorrect - Self-assessments are part of compliance but do not define zero risk appetite issues.
D . It will result in a compliance investigation conducted by the first line.
Incorrect - Investigations are typically conducted by the second or third line of defense (compliance or audit), not the first line.
PRMIA Reference for Verification
PRMIA Risk Appetite Guidelines
Basel & ISO 31000 Risk Management Frameworks


NEW QUESTION # 14
Which of the following principles is critical when creating the optimum policy range and content'?

  • A. Policy owners must ensure that policies are read by the regulator and then the shareholders.
  • B. New policies should be accompanied by Citable training for the target audience and added to the content of new employee training.
  • C. Policies should be divided into a large number of short topics to enhance accessibility.
  • D. Hard copies of a new policy should be placed in a central library of governance documents at the CRO's home.

Answer: B

Explanation:
Best Practices for Policy Development
Policies should be clearly written, well-structured, and accompanied by training to ensure employees understand their responsibilities.
PRMIA governance principles emphasize the need for training to enhance compliance and operational effectiveness.
Why Answer D is Correct
Training ensures policy adoption and understanding across the organization.
Integrating policies into new employee training helps embed governance and compliance culture.
Why Other Answers Are Incorrect
Option
Explanation:
A . Policies should be divided into a large number of short topics to enhance accessibility.
Incorrect - While policies should be structured for readability, excessive fragmentation can lead to confusion and inefficiency.
B . Policy owners must ensure that policies are read by the regulator and then the shareholders.
Incorrect - Policies are internal governance tools, not primarily for regulators or shareholders.
C . Hard copies of a new policy should be placed in a central library of governance documents at the CRO's home.
Incorrect - Policies should be centrally available within the organization, not at a personal location.
PRMIA Reference for Verification
PRMIA Governance Best Practices
ISO 31000 Risk Management Standards


NEW QUESTION # 15
The DORA act's full name is which of the following?

  • A. Digital Operational Resilience Act.
  • B. Daily Operational Resilience Act.
  • C. Digital Operational Risk Act.
  • D. Domain for Operational Risk Act.

Answer: A

Explanation:
Definition of DORA
The Digital Operational Resilience Act (DORA) is a regulation by the European Union (EU) aimed at strengthening the digital resilience of financial institutions.
It establishes a regulatory framework for managing information and communication technology (ICT) risks in the financial sector.
Key Objectives of DORA
Ensures that financial institutions can withstand, respond to, and recover from cyber threats and ICT-related disruptions.
Introduces standards for risk management, incident reporting, and third-party ICT risk oversight.
Why Other Answers Are Incorrect
Option
Explanation:
A . Domain for Operational Risk Act.
Incorrect - No such regulation exists under this name.
B . Digital Operational Risk Act.
Incorrect - The official name is Digital Operational Resilience Act (DORA).
C . Daily Operational Resilience Act.
Incorrect - DORA is not focused on daily operations but rather long-term digital resilience.
PRMIA Reference for Verification
PRMIA Risk Governance & Digital Resilience Standards
European Commission's Official DORA Regulation


NEW QUESTION # 16
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