QUIZ 2025 PRMIA 8020: ORM CERTIFICATE - 2023 UPDATE PASS-SURE EXAM OBJECTIVES PDF

Quiz 2025 PRMIA 8020: ORM Certificate - 2023 Update Pass-Sure Exam Objectives Pdf

Quiz 2025 PRMIA 8020: ORM Certificate - 2023 Update Pass-Sure Exam Objectives Pdf

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Tags: Exam 8020 Objectives Pdf, Question 8020 Explanations, Latest 8020 Test Pass4sure, 8020 Valid Test Pdf, Practice 8020 Exams Free

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PRMIA ORM Certificate - 2023 Update Sample Questions (Q55-Q60):

NEW QUESTION # 55
What are the roles of business versus risk management in developing and implementing risk assessments?

  • A. Business management's role in the risk assessment process should be confined to oversight.
  • B. Risk management, in its role as second line of defense, performs the risk assessment process from beginning to end. There is no business line involvement.
  • C. The business owns the risk assessment process, while risk management develops the framework, helps facilitate the process, and provides supervision and oversight.
  • D. Business owns the risk assessment process so risk management does not play a role in the process.

Answer: C

Explanation:
The Principles for Risk Governance, as established by PRMIA (Professional Risk Managers' International Association), emphasize the Three Lines of Defense (3LoD) Model, which is widely used in risk management and governance frameworks.
Business Line Ownership of Risk (First Line of Defense)
The business units are responsible for identifying, assessing, managing, and monitoring risks within their operations.
Since they generate the risks through their activities, they must own the risk assessment process.
This aligns with PRMIA Governance Principles, which state that risk management should be embedded within business operations to ensure proactive risk identification and control.
Risk Management's Role (Second Line of Defense)
The risk management function is not directly responsible for conducting risk assessments but plays a key role in designing and maintaining the risk assessment framework.
This includes setting standards, methodologies, and tools for assessing risks across business functions.
Risk management provides supervision and oversight, ensuring that risk assessments align with organizational policies and regulatory expectations.
Oversight from Senior Management & the Board (Third Line of Defense)
Internal audit (third line of defense) independently reviews and provides assurance that the risk management framework is effective and that risk assessments are conducted properly.
PRMIA's Risk Governance Standards emphasize that internal audit should evaluate the effectiveness of the risk assessment framework without being involved in its direct execution.
Why Other Answers Are Incorrect
Option
Explanation:
A . Risk management, in its role as second line of defense, performs the risk assessment process from beginning to end. There is no business line involvement.
Incorrect - Risk management facilitates and oversees the risk assessment process, but the business must take ownership of the risks it generates.
C . Business owns the risk assessment process so risk management does not play a role in the process.
Incorrect - While the business owns the process, risk management plays a crucial role in developing the framework, setting policies, and providing oversight.
D . Business management's role in the risk assessment process should be confined to oversight.
Incorrect - Business management is actively responsible for executing risk assessments, not just overseeing them.
PRMIA Reference for Verification
PRMIA Standards for Risk Governance - Establishes the Three Lines of Defense and the separation of responsibilities.
PRMIA Risk Management Framework (RMF) Guidelines - Defines the roles of business and risk management in risk assessment.
PRMIA Enterprise Risk Management Best Practices - Outlines how risk management facilitates risk assessments while the business retains ownership.
This answer is verified according to PRMIA's official risk governance documents and best practices. Would you like additional clarification or supporting documentation references?


NEW QUESTION # 56
For credit risk losses containing operational risk elements that have been historically included in an organizations' credit risk database how should the loss amount be treated?

  • A. The loss amount is split into credit and operational risk components.
  • B. The entire loss amount is treated as credit risk
  • C. The entire loss amount is treated as credit risk, but the loss is entered as a memorandum within the operational loss database and not used for capital modeling purposes.
  • D. The entire loss amount is treated as operational risk.

Answer: A

Explanation:
Understanding Credit Risk and Operational Risk Overlap
In some cases, credit risk losses contain elements of operational risk, such as fraud, documentation errors, or IT failures affecting credit transactions.
Basel II and III frameworks require institutions to distinguish between pure credit risk losses and operational risk components within those losses.
Treatment of Losses
The credit-related portion is accounted for under credit risk capital calculations.
The operational risk portion (e.g., fraud-related losses) should be classified separately and included in operational risk databases for risk measurement.
Why Answer C is Correct
Basel III and PRMIA recommend a clear split between credit risk and operational risk components to ensure accurate risk modeling.
If operational risk elements are ignored, an organization may underestimate its true operational risk exposure.
Why Other Answers Are Incorrect
Option
Explanation:
A . The entire loss amount is treated as credit risk.
Incorrect - This ignores operational risk components that should be accounted for separately.
B . The entire loss amount is treated as operational risk.
Incorrect - Credit risk losses are typically dominant in lending-related losses and should not be fully classified as operational risk.
D . The entire loss amount is treated as credit risk, but the loss is entered as a memorandum within the operational loss database and not used for capital modeling purposes.
Incorrect - The operational risk portion must be considered for capital modeling, not just recorded as a memo.
PRMIA Reference for Verification
Basel II & III Guidelines on Credit and Operational Risk Integration
PRMIA Operational Risk Framework


NEW QUESTION # 57
In operational resilience, what is impact tolerance?

  • A. Impact tolerance is a firm's tolerance for disruption to a particular business service.
  • B. Impact tolerance is a firm's risk capacity statement.
  • C. Impact tolerance is a firm's risk appetite statement.
  • D. Impact tolerance is a firm's tolerance for disruption to a particular business process.

Answer: A


NEW QUESTION # 58
Which of the following is not the purpose or benefit of a Risk Appetite statement?

  • A. The governing body articulates its expectations.
  • B. Assists with Strategic discussions.
  • C. Risk management standards and resources are likely to be improved.
  • D. Establishes the maximum risk that the organization can stand.

Answer: D

Explanation:
Step 1: Understanding a Risk Appetite Statement
Risk Appetite is the amount of risk an organization is willing to take to achieve its objectives.
A Risk Appetite Statement (RAS) communicates risk tolerance levels and management expectations.
Step 2: Why Option C is Incorrect
Risk Capacity (not Risk Appetite) defines the maximum risk the firm can withstand.
Risk Appetite is about willingness to take risk, not the absolute limit.
Step 3: Why the Other Options Are Correct
Option A ("Improves risk management standards") → Correct, as RAS helps define better risk management.
Option B ("Governing body articulates expectations") → Correct, as RAS is approved by the board.
Option D ("Assists strategic discussions") → Correct, as RAS guides decision-making.
PRMIA Risk Reference Used:
PRMIA Risk Appetite Framework - Differentiates between Risk Appetite and Risk Capacity.
Basel III Governance Principles - Encourages organizations to establish clear risk appetite statements.
Final Conclusion:
Risk Appetite does not establish the maximum risk the firm can withstand-that is Risk Capacity, making Option C the correct answer.


NEW QUESTION # 59
Which of the following principles best applies to a compliance function?

  • A. The compliance function should be outsourced if there is a risk function.
  • B. The compliance function should be independent of the business (following a three lines of defense model).
  • C. The compliance function should report to the business (even when following a three lines of defense model).
  • D. The risk function should be outsourced if there is a compliance function.

Answer: B

Explanation:
Step 1: Compliance Function and the Three Lines of Defense Model
The Three Lines of Defense (3LoD) model ensures that risk management responsibilities are properly segregated:
First Line: Business units (own and manage risk).
Second Line: Compliance and risk management (independent oversight).
Third Line: Internal audit (provides assurance).
Step 2: Why Compliance Must Be Independent
PRMIA and Basel Compliance Principles state that compliance should not report to business units, as this creates a conflict of interest.
Compliance must be independent to ensure objective oversight of regulatory adherence.
Step 3: Why the Other Options Are Incorrect
Option A ("Report to the business") → Incorrect because compliance must provide independent oversight, not report to business units.
Option C ("Outsource compliance if risk function exists") → Incorrect because compliance and risk functions have distinct roles.
Option D ("Outsource risk if compliance exists") → Incorrect because risk management is a core function, not an outsourcing candidate.
PRMIA Risk Reference Used:
PRMIA Compliance Risk Governance - States compliance must be independent under the Three Lines of Defense model.
Basel Compliance Principles - Recommends separate reporting structures for compliance and business units.
Final Conclusion:
Compliance must be independent from the business to avoid conflicts of interest, making Option B the correct answer.


NEW QUESTION # 60
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