CORES CORES Governance Frameworks & Risk Appetite 1

Question 1

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

Accepted Answer

The Board of Directors

Answer

The Board of Directors holds ultimate accountability for approving the operational risk appetite statement to ensure alignment with overall corporate strategy.

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

A RAS defines the aggregate level and types of operational risk the firm is willing to accept, linking risk tolerance to strategic goals.

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

The first line of defense consists of business unit managers and staff who own and manage operational risks in their daily activities.

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

An ORMF establishes the policies, processes, and tools that guide consistent identification, assessment, monitoring, and mitigation of operational risk across the organization.

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

Risk tolerance defines the acceptable deviation or buffer around the risk appetite level, triggering escalation or corrective action when breached.

(CORES) Certified Operational Risk Executive Specialist Practice Test

(CORES) Certified Operational Risk Executive Specialist Practice Test

CORES CORES Governance Frameworks & Risk Appetite 1