CORES CORES Governance Frameworks & Risk Appetite

Question 1

Which body is primarily responsible for approving a firm's operational risk appetite statement?

Accepted Answer

The Board of Directors

Answer

The Chief Risk Officer

Answer

The Internal Audit Committee

Answer

The compliance department

Question 2

A Risk Appetite Statement (RAS) for operational risk should primarily communicate which of the following?

Accepted Answer

The amount and types of operational risk a firm is willing to accept in pursuit of its objectives

Answer

The specific dollar threshold for individual loss events

Answer

The list of prohibited business activities

Answer

The number of full-time risk staff required

Question 3

Under the Three Lines of Defense model, which line is responsible for day-to-day operational risk management within business units?

Accepted Answer

First line

Answer

Second line

Answer

Third line

Answer

Fourth line

Question 4

What is the primary purpose of an Operational Risk Management Framework (ORMF)?

Accepted Answer

To provide a structured approach for identifying, assessing, monitoring, and mitigating operational risks

Answer

To eliminate all operational losses

Answer

To assign blame when incidents occur

Answer

To satisfy external auditors exclusively

Question 5

Risk tolerance differs from risk appetite in that risk tolerance refers to:

Accepted Answer

The acceptable variation around risk appetite thresholds before escalation is required

Answer

The maximum possible loss the firm could ever sustain

Answer

The board's preference for low-risk investments

Answer

The minimum capital the firm must hold

Question 6

Which governance principle ensures that risk management decisions are made by personnel with appropriate authority and expertise?

Accepted Answer

Segregation of duties and delegated authority

Answer

Centralized decision-making

Answer

Profit-center self-governance

Answer

Voluntary compliance programs