Risk Management Flashcards
6 cards from real CBA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Risk Management flashcards as text
What is the primary objective of risk management in banking?
Answer: To minimize potential losses and ensure stability
Risk management aims to identify, assess, and mitigate potential threats that could affect a bank's financial stability and operations.
Which of the following is considered a market risk?
Answer: Change in interest rates
Market risk arises from fluctuations in market variables such as interest rates, exchange rates, and stock prices.
What is the role of stress testing in risk management?
Answer: To evaluate resilience under adverse scenarios
Stress testing evaluates how a bank would perform under extreme but plausible adverse conditions, helping to prepare and plan.
Which type of risk is associated with borrower default?
Answer: Credit risk
Credit risk refers to the possibility that a borrower may fail to fulfill financial obligations, impacting the lender's earnings.
How does diversification help in risk management?
Answer: Reduces risk by spreading exposure
Diversification spreads investments across various assets, reducing exposure to any single source of risk.
Which department typically oversees enterprise risk management in a bank?
Answer: Risk management department
The risk management department is responsible for identifying and controlling risks across the entire organization.