CORES CORES Governance Frameworks & Risk Appetite 3

Question 1

What is the primary risk of having an overly aspirational (i.e., too low) operational risk appetite?

Accepted Answer

Business units may conceal losses to avoid appearing non-compliant with the stated appetite

Answer

An unrealistically low appetite can incentivize staff to hide or under-report losses rather than surface them, undermining transparency and risk culture.

Question 2

Which of the following best describes the role of the Chief Risk Officer (CRO) in operational risk governance?

Accepted Answer

Setting the overall risk management framework and providing independent oversight of risk-taking activities

Answer

The CRO establishes the enterprise risk framework and provides independent oversight, ensuring the second line of defense functions effectively.

Question 3

A governance gap where no single owner is accountable for an operational risk is best described as:

Accepted Answer

An orphan risk

Answer

An orphan risk is one that falls between organizational boundaries, with no designated owner responsible for monitoring or mitigating it.

Question 4

Which principle of sound governance requires that risk management activities be documented and available for review?

Accepted Answer

Transparency and auditability

Answer

Transparency and auditability require that risk decisions, assessments, and actions are documented so they can be independently verified and reviewed.

Question 5

When a firm's operational risk profile materially changes due to a major acquisition, what governance action is most immediately required?

Accepted Answer

Reassessing and potentially revising the risk appetite statement and ORMF

Answer

A major acquisition changes the firm's risk profile, requiring prompt reassessment of the risk appetite and framework to reflect new exposures and controls.

(CORES) Certified Operational Risk Executive Specialist Practice Test

(CORES) Certified Operational Risk Executive Specialist Practice Test

CORES CORES Governance Frameworks & Risk Appetite 3