AS-05 (v) Actuarial Aspects of Risk Management Mock Test 13
This section explains advanced concepts in enterprise risk management, probabilistic modelling, asset-liability management (ALM), and liquidity risk. It discusses the use of external databases, scenario selection, and continuous monitoring of the risk environment. The chapter highlights Basel III liquidity requirements, including the Liquidity Coverage Ratio (LCR), and explains the role of separate risk management functions in managing credit risk. It defines risk as the possibility of events affecting enterprise value and encourages managers to consider both positive and negative outcomes. The section also covers interest rate sensitivity, liquidity management, and research methods for measuring the level of risk control.
1. Examples of external databases for probabilistic modelling mentioned in the chapter include:
A. SAP and Oracle
B. Bloomberg and Reuters
C. ORX or Fitch First databases
D. Google and Yahoo
E. Excel and Word
2. How many scenarios are typically considered most appropriate for further discussion and selection?
A. One
B. Three
C. Two
D. Five
E. Ten
3. From the ALM perspective, liquidity risk focuses primarily on:
A. Brand reputation
B. Staff turnover
C. Equity price movements
D. Tax compliance
E. Funding liquidity risk – the ability to meet current and future cash-flow obligations and collateral needs
4. Within the ALM function, the credit risk specifically in the loan portfolio is handled by:
A. The marketing department
B. The board chairman alone
C. The ALM team directly
D. A separate risk management function
E. External auditors
5. Which step involves continually measuring and monitoring the risk environment?
A. Prioritize
B. Establish context
C. Analyze consequences
D. Monitor
E. Identify risks
6. The LCR (Liquidity Coverage Ratio) is described as one of the new ratios of which framework?
A. GAAP
B. Basel III
C. IFRS 9
D. Basel I
E. Solvency I
7. According to the chapter, risk is defined as the possibility of events occurring which have an adverse impact on the:
A. Office location
B. Economic value of an enterprise as well as the uncertainty over the outcome of past events
C. Marketing budget
D. Advertising reach
E. Employee morale only
8. The step titled 'Don't Forget the Upside' advises management to consider which of the following?
A. Only cost reduction
B. Only competitor strategies
C. Only downside risks
D. Only regulatory compliance
E. The potential positive outcomes from events and the impact of risks that do not occur
9. When RSA is less than RSLs and interest rates increase, the net interest income:
A. Doubles
B. Increases
C. Stays the same
D. Is unaffected
E. Decreases
10. In the Research Methodology, which abbreviation refers to the level of risk control?
A. NI
B. EAR
C. LRC
D. PRE
E. EL
