CISI UAE FRR Risk Management Frameworks

Question 1

The 'three lines of defence' model in UAE financial institution risk management consists of:

Accepted Answer

Business lines, risk/compliance functions, and internal audit

Answer

The three lines model: 1st line (business units own and manage risks), 2nd line (risk management and compliance provide oversight and challenge), 3rd line (internal audit provides independent assurance).

Question 2

Under the CBUAE's risk management framework for banks, the Risk Appetite Statement (RAS) should be:

Accepted Answer

Approved by the Board and cascaded through the organisation in measurable metrics

Answer

The RAS articulates the Board-approved level and types of risk the bank is willing to accept in pursuit of its strategy; it must be translated into measurable limits and metrics that are monitored and reported regularly.

Question 3

Which Basel III risk category covers the risk of losses from inadequate processes, systems, people, or external events?

Accepted Answer

Operational risk

Answer

Operational risk encompasses losses from failures in processes, systems, or human error, as well as external events such as fraud, cyberattacks, natural disasters, and legal risks.

Question 4

Under CBUAE regulations, banks must conduct stress tests to assess:

Accepted Answer

The impact of adverse scenarios on capital, liquidity, and profitability

Answer

Stress testing evaluates the bank's resilience under adverse scenarios (economic downturns, market shocks, liquidity crises) to identify vulnerabilities and ensure adequate capital and liquidity buffers.

Question 5

The CBUAE's guidance on model risk requires banks to:

Accepted Answer

Validate, document, and regularly review all financial models used for risk measurement

Answer

Model risk management requires robust development, independent validation, documentation, and regular review of models to ensure they remain fit for purpose and that model limitations are understood.

CISI UAE FRR Practice Test

CISI UAE FRR Practice Test

CISI UAE FRR Risk Management Frameworks