Regulatory Compliance & Ethical Standards Flashcards

Under the Employee Retirement Income Security Act (ERISA), a fiduciary managing a pension plan must act in accordance with which primary standard?

Answer: The prudent man (prudent expert) standard

ERISA fiduciaries must act with the care, skill, prudence, and diligence of a knowledgeable expert—the 'prudent expert' standard—when managing plan assets.

The National Association of Insurance Commissioners (NAIC) serves primarily as:

Answer: A standard-setting organization that promotes uniformity among state insurance regulators

The NAIC is a regulatory support organization that helps state insurance regulators develop standards and best practices, but it has no direct regulatory authority.

A risk manager who accepts side consulting work for a competitor without disclosing it to their employer is MOST likely violating which ethical principle?

Answer: Loyalty and conflict of interest standards

Undisclosed consulting for a competitor violates loyalty obligations and creates an unacceptable conflict of interest with the risk manager's primary employer.

Under the Americans with Disabilities Act (ADA), an employer's risk manager must ensure that 'reasonable accommodations' are provided unless doing so would cause:

Answer: Undue hardship to the organization

Employers must provide reasonable accommodations for qualified individuals with disabilities unless the accommodation would impose an undue hardship on the organization.

In risk management, 'regulatory risk' is BEST defined as:

Answer: The risk of financial loss or reputational harm resulting from changes in laws, regulations, or their enforcement

Regulatory risk encompasses the potential for adverse impacts arising from new, changed, or differently-enforced laws and regulations affecting the organization.

Which of the following BEST describes the purpose of an organization's 'code of conduct' from a risk management perspective?

Answer: To establish behavioral standards that reduce ethical and compliance risk

A code of conduct establishes clear behavioral expectations that help prevent ethical violations and reduce compliance risk across the organization.

The concept of 'strict liability' in risk management is significant because it means:

Answer: Organizations can be held responsible for damages regardless of fault or negligence

Strict liability holds parties responsible for damages without requiring proof of negligence or intent, making risk transfer mechanisms particularly important in applicable industries.