CISI UAE FRR Risk Management 2

Question 1

What is counterparty risk in financial transactions?

Accepted Answer

The risk that the other party in a financial transaction will default on their contractual obligations

Answer

The risk of losing office equipment

Answer

The risk of inflation

Answer

The risk of government intervention

Question 2

What is the role of the compliance function in UAE financial institutions?

Accepted Answer

Ensuring the institution adheres to all applicable laws, regulations, and internal policies

Answer

Only preparing annual reports

Answer

Managing investment portfolios

Answer

Approving client loan applications

Question 3

What is concentration risk and why is it monitored by UAE regulators?

Accepted Answer

Risk from excessive exposure to a single counterparty, sector, or geographic area, which could amplify losses

Answer

Risk from having too many employees

Answer

Risk from offering too many products

Answer

Risk from operating in too many countries

Question 4

What is the three lines of defense model used in UAE financial risk management?

Accepted Answer

Business line management (1st), risk and compliance functions (2nd), and internal audit (3rd)

Answer

Three separate security checkpoints

Answer

Three different insurance policies

Answer

Three levels of government regulation

Question 5

What is reputational risk and how does it affect UAE financial institutions?

Accepted Answer

The risk of damage to an institution's standing that could result in loss of business, legal action, or regulatory sanctions

Answer

The risk of negative online reviews

Answer

Only relevant to marketing departments

Answer

The risk of competitor advertising

Question 6

What reporting requirements exist for UAE financial institutions regarding risk management?

Accepted Answer

Regular submission of risk reports to the CBUAE covering capital adequacy, liquidity, and large exposures

Answer

No reporting is required

Answer

Only annual reporting to shareholders

Answer

Reports are only required during financial crises