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PRMIA 8020 Exam Syllabus Topics:
Topic
Details
Topic 1
- Case Studies: This section of the exam measures the skills of Business Risk Consultants and covers real-world applications of risk management concepts. It examines case studies on risk governance, assessment, and mitigation strategies across different industries. A key skill measured is analyzing historical risk events for strategic insights.
Topic 2
- Risk Assessment: This section of the exam measures the skills of Financial Risk Analysts and covers methodologies for evaluating risks in different domains, including qualitative and quantitative approaches. It focuses on assessing vulnerabilities, threats, and potential impacts on business operations. A key skill measured is conducting risk impact analysis for financial threats.
Topic 3
- Risk Management Framework: This section of the exam measures the skills of Risk Managers and covers the development and implementation of structured approaches for risk identification, evaluation, and mitigation. It includes industry-standard frameworks that guide risk strategy and decision-making. A key skill measured is establishing a risk management framework for organizations.
Topic 4
- Risk Governance: This section of the exam measures the skills of Compliance Officers and covers the policies, structures, and processes that define how organizations oversee risk. It explores regulatory compliance, ethical considerations, and corporate governance frameworks to ensure accountability. A key skill measured is applying governance frameworks to organizational risk policies.
PRMIA ORM Certificate - 2023 Update Sample Questions (Q38-Q43):
NEW QUESTION # 38
The Internal Loss Multiplier (ILM) is part of the Basel III Standardized Approach. Which of these definitions best descibes it?
- A. It is a non-financial factor that is based on a bank's average historical losses.
- B. It is a financial-statement-based proxy for operational risk.
- C. t is a scaling factor that is based on a bank's average historical losses.
- D. It is uniform, and is used for indicating consistent incidents on an average return basis.
Answer: C
Explanation:
The Internal Loss Multiplier (ILM) is a key component of the Basel III Standardized Approach for Operational Risk. It is designed to adjust capital requirements based on a bank's historical loss experience.
Definition of ILM
ILM is a scaling factor that adjusts the operational risk capital requirement based on a bank's internal loss history.
It is derived using a formula that incorporates historical operational risk losses relative to a bank's revenue.
Why ILM Exists in Basel III
Basel III replaced the Advanced Measurement Approach (AMA) with a Standardized Approach that includes ILM to ensure that banks with high historical losses hold more capital for operational risk.
Why Other Answers Are Incorrect
Option
Explanation:
A . It is a financial-statement-based proxy for operational risk.
Incorrect - ILM is not a general financial statement proxy; it specifically adjusts capital based on past operational losses.
B . It is a non-financial factor that is based on a bank's average historical losses.
Incorrect - ILM is financial in nature because it directly influences capital requirements.
D . It is uniform, and is used for indicating consistent incidents on an average return basis.
Incorrect - ILM is not uniform; it is bank-specific and varies based on loss history.
PRMIA Reference for Verification
PRMIA Operational Risk Standards
Basel III Standardized Approach for Operational Risk
NEW QUESTION # 39
Team supervisors are key in the development and maintenance of the risk culture because they are:
- A. More experienced than the employees that report to them.
- B. Connected with every employee, every day, and can ensure desired behaviors are followed by all.
- C. Visible to regulators and can describe the firm's risk culture to their board.
- D. Visible to regulators and can describe the firm's risk culture to inspection teams.
Answer: B
Explanation:
Team supervisors play a critical role in shaping and maintaining an organization's risk culture. PRMIA's Risk Governance Framework and Risk Culture Principles emphasize that supervisors act as the link between risk policies and frontline employees, ensuring that risk-aware behaviors are consistently followed.
Step 1: Role of Supervisors in Risk Culture Development
Supervisors engage with employees daily, providing guidance on risk-based decision-making.
They reinforce risk policies, standards, and expectations set by senior management.
Supervisors identify behavioral trends that may indicate risk culture weaknesses.
Step 2: Supervisors as Enforcers of Risk Culture
PRMIA's Risk Culture Framework stresses that risk culture must be embedded into daily operations through supervisor-led enforcement.
Supervisors monitor, correct non-compliant behaviors, and provide ongoing risk awareness training.
Their proximity to employees allows them to detect early warning signs of risk issues.
Step 3: Why the Other Options Are Incorrect
Option A: "More experienced than the employees that report to them."
Experience alone does not establish or maintain a risk culture.
A risk culture is about behaviors and practices, not just expertise.
Option B: "Visible to regulators and can describe the firm's risk culture to inspection teams." While supervisors may interact with regulators, their primary role is to engage with employees daily rather than acting as spokespersons.
Option D: "Visible to regulators and can describe the firm's risk culture to their board." Boards typically rely on Chief Risk Officers (CROs) or senior executives to communicate risk culture, not direct supervisors.
PRMIA Risk Reference Used:
PRMIA Risk Culture Framework - Highlights the role of supervisors in ensuring risk-aware behaviors.
PRMIA Risk Governance Framework - Stresses that frontline supervisors must enforce risk management policies.
PRMIA Risk Awareness Guidelines - Reinforces daily interaction as a key factor in maintaining a strong risk culture.
Final Conclusion:
Supervisors directly influence employees' behaviors and ensure that risk culture is consistently followed, making Option C the correct answer.
NEW QUESTION # 40
For the TSB case what was the cause of the outage at the heart of the case?
- A. A liquidity squeeze by a major hedge-fund via margin calls on trading positions resulted in the collapse of their website.
- B. Their IT models did not work if prices were discontinuous.
- C. A failed attempts to move customers to a new IT system left millions of people locked out of their accounts for weeks.
- D. Sub-standard risk pricing and risk management left millions of people locked out of their accounts for weeks.
Answer: C
Explanation:
Step 1: Understanding the TSB Case
The TSB outage in 2018 was caused by a failed IT migration from its old banking system to a new one.
The transition locked millions of customers out of their accounts for weeks, resulting in financial losses and reputational damage.
Step 2: Why Option C Is Correct
TSB attempted to move customer data to a new banking platform, but serious defects in the migration process led to service failures.
PRMIA and UK Financial Conduct Authority (FCA) reports confirmed that poor IT risk management was a key failure.
Step 3: Why the Other Options Are Incorrect
Option A ("Liquidity squeeze by hedge-fund")
Incorrect because TSB's failure was due to IT migration issues, not a liquidity crisis.
Option B ("Sub-standard risk pricing and risk management")
Incorrect because pricing models were not the cause-it was an IT system failure.
Option D ("IT models did not work if prices were discontinuous")
Incorrect as this issue is more common in high-frequency trading failures, not banking system outages.
PRMIA Risk Reference Used:
UK FCA Investigation on TSB Incident - Confirms IT migration failure as root cause.
PRMIA IT Risk Management Framework - Highlights risks of major IT transitions.
Final Conclusion:
The TSB outage was caused by a failed IT migration, making Option C the correct answer.
NEW QUESTION # 41
The acronym ESG can stand for:
- A. Environmental. Social and corporate Governance.
- B. Extra Social Governance.
- C. Environmental. Strategy, and corporate Governance.
- D. Enhanced Social Governance.
Answer: A
Explanation:
Step 1: Definition of ESG
ESG (Environmental, Social, and Corporate Governance) refers to the three core factors used to evaluate a company's sustainability and ethical impact.
ESG is now a key part of risk management, influencing investment decisions, regulatory compliance, and corporate strategy.
Step 2: Breakdown of ESG Components
Environmental (E): Climate change, carbon emissions, resource management.
Social (S): Diversity & inclusion, labor rights, community engagement.
Governance (G): Board structure, executive pay, corporate ethics.
Step 3: Why the Other Options Are Incorrect
Option A ("Environmental, Strategy, and Corporate Governance")
Incorrect because Strategy is not part of ESG.
Option C ("Enhanced Social Governance")
Incorrect because ESG covers more than just social governance.
Option D ("Extra Social Governance")
Incorrect as it does not align with the recognized ESG definition.
PRMIA Risk Reference Used:
PRMIA ESG Risk Management Guidelines - Defines ESG factors as Environmental, Social, and Governance.
PRI (Principles for Responsible Investment) - Aligns ESG with financial risk management.
NEW QUESTION # 42
Risk and compliance functions often work together; which of the following best desribes the issue with a "zero risk appetite"?
- A. It will result in a compliance investigation conducted by the first line.
- B. A zero risk appetite is illegal under all known regulations.
- C. An organization may decide that it will accept a certain level of outstanding compliance issues and thus will breach such an appetite statement.
- D. It means that there can be a risk self assessment workshop for the compliance department.
Answer: C
Explanation:
Understanding Zero Risk Appetite in Compliance
A zero risk appetite means the organization does not tolerate any compliance breaches.
However, in real-world risk management, it is often impractical to have zero risk exposure.
Some compliance violations may occur despite strong controls, making a strict zero-risk stance unrealistic.
Why Answer C is Correct
If an organization adopts a zero risk appetite for compliance, any compliance issue, even minor ones, would breach this policy.
This contradicts practical risk management, which allows for some residual risk while maintaining controls.
Why Other Answers Are Incorrect
Option
Explanation:
A . A zero risk appetite is illegal under all known regulations.
Incorrect - It is not illegal, but it is impractical in many industries.
B . It means that there can be a risk self-assessment workshop for the compliance department.
Incorrect - Self-assessments are part of compliance but do not define zero risk appetite issues.
D . It will result in a compliance investigation conducted by the first line.
Incorrect - Investigations are typically conducted by the second or third line of defense (compliance or audit), not the first line.
PRMIA Reference for Verification
PRMIA Risk Appetite Guidelines
Basel & ISO 31000 Risk Management Frameworks
NEW QUESTION # 43
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