AS-05 (v) Actuarial Aspects of Risk Management Mock Test 14
This section discusses enterprise risk management, business environment, financial management, and asset-liability management (ALM). It explains India's mixed economy, the importance of contingency planning, and how understanding major risks supports effective implementation of enterprise risk management. The chapter distinguishes between internal and external business environments, highlights the advantages and disadvantages of debt financing, and compares historical and synthetic scenarios for risk analysis. It also introduces the Model Loss Control (MLC), explains the impact of high-probability, high-impact risks on projects, discusses examples of market risk, and emphasizes interest rate management through net interest margin within the ALM framework.
1. Which economic system has India adopted according to the chapter?
A. Socialist economy
B. Closed economy
C. Barter economy
D. Capitalist economy
E. Mixed economy
2. Based on trigger events documented during the risk analysis and mitigation processes, who will have the authority to enact contingency plans as deemed appropriate?
A. Only external regulators
B. Only the marketing department
C. No one
D. The project team or project managers
E. Only the insurance company
3. Why might knowledge about the 10 most important risks and their potential impact on losses and allocation of Economic Capital convince decision makers?
A. To ignore benchmarking
B. To reduce stakeholder communication
C. To increase risk exposure
D. To implement ERM and lead to more effective, less expensive and more successful implementation of ERM
E. To cancel ERM entirely
4. Which of the following are the two main types of business environment?
A. Internal and external
B. Direct and indirect
C. Economic and non-economic
D. Primary and secondary
E. Local and global
5. Which of the following is a disadvantage of using debt?
A. Dividends are optional
B. Fixed charges must be paid regardless of available earnings or cash flow
C. It never adds risk
D. It has no maturity date
E. Interest is not tax deductible
6. Compared to history-based scenarios, synthetic scenarios require:
A. Regulatory approval
B. No assumptions
C. Only historical data
D. Fewer assumptions
E. More assumptions
7. Which model is based on the relationship between losses and the level of risk control?
A. Model Top Ten (MTT)
B. Model Option Pricing (MOP)
C. Model Frequency Control (MFC)
D. Model Capital Asset (MCA)
E. Model Loss Control (MLC)
8. High Impact, High Probability risks often cause a project to:
A. Become low risk
B. Require no action
C. Succeed automatically
D. Be ignored
E. Be terminated, or to fail if continued in spite of the risks
9. Which of the following is an example of a market risk mentioned in the chapter?
A. Employee turnover
B. Equity risk
C. Product quality
D. Customer dissatisfaction
E. Vendor dependency
10. The immediate focus of ALM is interest-rate risk and return as measured by a bank's:
A. Cost-to-income ratio
B. Market capitalisation
C. Branch network
D. Net interest margin
E. Dividend payout
