Risk Management Flashcards
7 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 7 Risk Management flashcards as text
Which risk management framework is most widely adopted by U.S. banks for enterprise-wide risk governance?
Answer: COSO ERM
COSO ERM provides a widely adopted enterprise risk management framework that aligns risk with strategy and performance.
Concentration risk in a loan portfolio is BEST mitigated by:
Answer: Diversifying exposures across industries and geographies
Diversifying exposures reduces the risk that losses in one sector or region will disproportionately impact the portfolio.
A bank's net interest margin (NIM) is primarily affected by which type of risk?
Answer: Interest rate risk
Interest rate risk affects the difference between interest earned on assets and interest paid on liabilities, directly impacting NIM.
Under Basel III, the Liquidity Coverage Ratio (LCR) requires banks to hold enough high-quality liquid assets to survive a stress scenario lasting:
Answer: 30 days
The LCR mandates that banks hold sufficient HQLA to cover net cash outflows over a 30-day stress period.
Which qualitative risk tool helps a bank identify and prioritize risks by plotting likelihood against impact?
Answer: Heat map / Risk matrix
A heat map (risk matrix) visually prioritizes risks by mapping probability on one axis and impact on the other.
The 'three lines of defense' model assigns primary risk ownership to:
Answer: Business line management
The first line of defense consists of business line managers who own and manage risks in their day-to-day operations.
Stress testing differs from traditional sensitivity analysis because stress testing:
Answer: Examines extreme but plausible scenarios beyond normal model ranges
Stress testing evaluates a bank's resilience under severe, tail-risk scenarios that go beyond standard statistical ranges.