NAB Risk Management and Insurance 2

Question 1

Which type of risk arises when a borrower fails to meet their contractual debt obligations to a bank?

Accepted Answer

Credit risk

Answer

Credit risk is the risk of financial loss due to a borrower's failure to repay a loan or meet contractual obligations.

Question 2

A bank's risk appetite statement primarily defines:

Accepted Answer

The types and amounts of risk the bank is willing to accept in pursuit of its strategy

Answer

A risk appetite statement articulates the level and types of risk a bank is willing to accept to achieve its strategic objectives.

Question 3

What does a 'stress test' in banking risk management typically assess?

Accepted Answer

The bank's resilience under severe but plausible adverse economic scenarios

Answer

Stress tests evaluate how a bank's financial position would hold up under hypothetical adverse scenarios such as economic downturns or market shocks.

Question 4

Which insurance product specifically protects a business against losses resulting from employee dishonesty or fraud?

Accepted Answer

Fidelity bond (crime insurance)

Answer

A fidelity bond, also called crime insurance, covers losses caused by fraudulent or dishonest acts committed by employees.

Question 5

In the context of insurance, 'subrogation' refers to:

Accepted Answer

The insurer's right to pursue a third party that caused an insured loss after paying the claim

Answer

Subrogation allows an insurer to recover costs from a responsible third party after compensating the insured for a loss.

(NAB) National Australia Bank Practice Test