CISI UAE FRR Risk Management Frameworks 2

Question 1

The CBUAE's Operational Risk Management guidance requires banks to maintain a:

Accepted Answer

Risk and Control Self-Assessment (RCSA) process to identify and assess operational risks

Answer

RCSAs involve business units systematically identifying their key operational risks, assessing inherent and residual risk levels, and evaluating the effectiveness of controls, forming the foundation of operational risk management.

Question 2

Under Basel III as implemented in the UAE, the Leverage Ratio requires banks to maintain a minimum ratio of:

Accepted Answer

Tier 1 capital of at least 3% of total exposures

Answer

The Leverage Ratio requires Tier 1 capital to be at least 3% of total (non-risk-weighted) exposures, acting as a backstop to risk-based capital ratios and preventing excessive leverage.

Question 3

The CBUAE requires banks to have a 'Business Continuity Plan' (BCP) that addresses:

Accepted Answer

Recovery of critical functions within defined timeframes after a disruption

Answer

BCPs must ensure banks can recover and continue critical operations within agreed Recovery Time Objectives (RTOs) after any significant disruption, whether from technology failure, natural disaster, or other events.

Question 4

Under CBUAE credit risk guidelines, 'Probability of Default' (PD) measures:

Accepted Answer

The likelihood that a borrower will default within a given time horizon

Answer

PD measures the statistical likelihood that a borrower will default on their obligations within a defined period (typically one year), and is a key input to credit risk measurement and IFRS 9 expected credit loss calculations.

Question 5

Which risk management tool identifies the maximum potential loss over a defined period at a given confidence level?

Accepted Answer

Value at Risk (VaR)

Answer

VaR quantifies the maximum expected loss over a defined time horizon (e.g., 1 day) at a specified confidence level (e.g., 99%), providing a single statistical measure of market risk exposure.

CISI UAE FRR Practice Test

CISI UAE FRR Practice Test

CISI UAE FRR Risk Management Frameworks 2