Partners, Directors and Senior Officers Course (PDO) Practice Questions And Answers
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Question 1 of 20
1. Question
In general, a risk-appetite system includes the following elements:
Correct
A transparent characterization of the competitive activities that a corporation is equipped to engage in, and the risk thresholds that it is able to consider, and an understanding of all the different threats that the enterprise is facing, both at the level of the business entity and as a whole.
Incorrect
A transparent characterization of the competitive activities that a corporation is equipped to engage in, and the risk thresholds that it is able to consider, and an understanding of all the different threats that the enterprise is facing, both at the level of the business entity and as a whole.
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Question 2 of 20
2. Question
The whole risk environment of the company that represents the complexity and size of its aggregated risk exposures within and across each specific risk category is called:
Correct
Risk profile: The firm’s entire risk landscape reflecting the nature and scale of its risk exposures aggregated within and across each relevant risk category.
Incorrect
Risk profile: The firm’s entire risk landscape reflecting the nature and scale of its risk exposures aggregated within and across each relevant risk category.
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Question 3 of 20
3. Question
To the degree that: A risk-appetite system is fine is:
Correct
A risk appetite framework is good to the extent that it allows the people who set a firm’s strategy to accept in a conscious way the risks that correspond with that strategy and the underlying business model. It’s good to the extent that people within a firm who take risks on its behalf know what strategic objectives they are supporting in their risk-taking; and keep within the limits translating these objectives. It’s good to the extent that all of a firm’s material risks are understood, along with the drivers of those risks. And it’s good to the extent that risk appetite language as the key ingredient of its risk culture permeates the firm, its decision-making processes and the understanding of its own performance.
Incorrect
A risk appetite framework is good to the extent that it allows the people who set a firm’s strategy to accept in a conscious way the risks that correspond with that strategy and the underlying business model. It’s good to the extent that people within a firm who take risks on its behalf know what strategic objectives they are supporting in their risk-taking; and keep within the limits translating these objectives. It’s good to the extent that all of a firm’s material risks are understood, along with the drivers of those risks. And it’s good to the extent that risk appetite language as the key ingredient of its risk culture permeates the firm, its decision-making processes and the understanding of its own performance.
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Question 4 of 20
4. Question
The risk assessment method is usually one of brainstorming on a project and the normal brainstorming principles apply:
Correct
The full project team should be actively involved. Potential risks should be identified by all members of the project team. No criticism of any suggestion is permitted. Any potential risk identified by anyone should be recorded, regardless of whether other members of the group consider it to be significant. All potential risks identified by brainstorming should be documented and followed up by the IPT.
Incorrect
The full project team should be actively involved. Potential risks should be identified by all members of the project team. No criticism of any suggestion is permitted. Any potential risk identified by anyone should be recorded, regardless of whether other members of the group consider it to be significant. All potential risks identified by brainstorming should be documented and followed up by the IPT.
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Question 5 of 20
5. Question
The Financial Conduct Authority (FCA) also considers the robustness and efficacy of governance structures as the foundation for an existing company that manages risk and complies with the regulations. With respect to Governance Culture in Financial Services, what should the internal audit be doing in terms of key elements for the Senior Management function?
Correct
The distribution of the Senior Management Function (SMF), the assigned roles and the appropriateness of the distribution, and whether there are any differences in regulatory requirements and whether the SMFs have generated handover papers.
Incorrect
The distribution of the Senior Management Function (SMF), the assigned roles and the appropriateness of the distribution, and whether there are any differences in regulatory requirements and whether the SMFs have generated handover papers.
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Question 6 of 20
6. Question
A firm should ensure that all workers are able to carry out their operational risk management obligations and be aware of them, including by creating and maintaining:
Correct
Specific policy documents and relevant processes and procedures guides that are easily conveyed to workers and accessible for personnel analysis if appropriate.
Incorrect
Specific policy documents and relevant processes and procedures guides that are easily conveyed to workers and accessible for personnel analysis if appropriate.
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Question 7 of 20
7. Question
Risk management has assumed an even greater position in today’s global economy, as companies are more often exposed to fluctuations in foreign exchange rates. What of the following is perhaps one of the treasury department’s most critical functions?
Correct
In today’s global marketplace, risk management has taken on an even more important role as businesses are more frequently exposed to foreign exchange rate movements. Indeed, liquidity risk management is arguably one of the most important functions of the treasury department.
Incorrect
In today’s global marketplace, risk management has taken on an even more important role as businesses are more frequently exposed to foreign exchange rate movements. Indeed, liquidity risk management is arguably one of the most important functions of the treasury department.
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Question 8 of 20
8. Question
A framework for ensuring compliance with policies should include monitoring mechanisms and procedures. Examples of main enforcement elements in a policy evaluation include:
Correct
Top-level reviews of progress towards stated objectives, verifying compliance with management controls, review of the treatment and resolution of instances of non-compliance, evaluation of the required approvals and authorisations to ensure accountability to an appropriate level of management and tracking reports for approved exceptions to thresholds or limits, management overrides and other deviations from policy.
Incorrect
Top-level reviews of progress towards stated objectives, verifying compliance with management controls, review of the treatment and resolution of instances of non-compliance, evaluation of the required approvals and authorisations to ensure accountability to an appropriate level of management and tracking reports for approved exceptions to thresholds or limits, management overrides and other deviations from policy.
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Question 9 of 20
9. Question
In addition to the division of duties and dual control, banks will ensure that conventional internal controls are in place to mitigate operational risk as necessary. Examples of such inspections include:
Correct
Clearly established authorities and/or processes for approval, close monitoring of adherence to assigned risk thresholds or limits, safeguards for access to, and use of, bank assets and records, appropriate staffing level and training to maintain expertise, ongoing processes to identify business lines or products where returns appear to be out of line with reasonable expectations, regular verification and reconciliation of transactions and accounts and a vacation policy that provides for officers and employees being absent from their duties for a period of not less than two consecutive weeks.
Incorrect
Clearly established authorities and/or processes for approval, close monitoring of adherence to assigned risk thresholds or limits, safeguards for access to, and use of, bank assets and records, appropriate staffing level and training to maintain expertise, ongoing processes to identify business lines or products where returns appear to be out of line with reasonable expectations, regular verification and reconciliation of transactions and accounts and a vacation policy that provides for officers and employees being absent from their duties for a period of not less than two consecutive weeks.
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Question 10 of 20
10. Question
Long-term partnerships, short-term partnerships and personal partnerships are branches of:
Correct
Divisions of joint activities of internal outsourcing include long-term partnership, short-term partnership, and single partnerships.
Incorrect
Divisions of joint activities of internal outsourcing include long-term partnership, short-term partnership, and single partnership.
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Question 11 of 20
11. Question
Which of the given statements is not FCA’s view of a board’s(board of directors) role?
Correct
Group in charge of setting the plan and keeping management responsible for execution is not the responsibility of board’s(board of directors) in the view of FCA.
Incorrect
Group in charge of setting the plan and keeping management responsible for execution is not the responsibility of board’s(board of directors) in the view of FCA.
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Question 12 of 20
12. Question
An audit committee has the possible benefits of:
Correct
The audit committee has the potential advantages of increased transparency of financial reports and enhanced public faith in the quality and objectivity of financial statements.
Incorrect
The audit committee has the potential advantages of increased transparency of financial reports and enhanced public faith in the quality and objectivity of financial statements.
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Question 13 of 20
13. Question
The FCA describes a complaint as an indication of (oral or written) disappointment with the delivery, or lack, of a financial service. It allegations how you endured (or could suffer):
Correct
The FCA defines a complaint as an expression of dissatisfaction (oral or written) about the provision of, or failure to provide, a financial service. It alleges how you have suffered (or may suffer) financial loss, material distress or material inconvenience.
Incorrect
The FCA defines a complaint as an expression of dissatisfaction (oral or written) about the provision of, or failure to provide, a financial service. It alleges how you have suffered (or may suffer) financial loss, material distress or material inconvenience.
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Question 14 of 20
14. Question
Which of the following is a misconception about the reputational risk of a management or a business?
Correct
Reputation risk management becomes an integral part of business decision processes, ranging from new product approval and credit decisions to procurement.
Incorrect
Reputation risk management becomes an integral part of business decision processes, ranging from new product approval and credit decisions to procurement.
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Question 15 of 20
15. Question
A organization should develop and retain sufficient structures and controls to handle operating threats that could arise from inadequacies or deficiencies in its processes and procedures (including, if applicable, third party vendors, agents and others ‘ systems and processes). When doing so a company will take into account:
Correct
Its arrangements for the continuity of operations in the event that a significant process or system becomes unavailable or is destroyed.
Incorrect
Its arrangements for the continuity of operations in the event that a significant process or system becomes unavailable or is destroyed.
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Question 16 of 20
16. Question
A company will have adequate systems and controls in place and retained to handle its threats to information security. In doing so a organization would consider:
Correct
A firm should have regard to confidentiality, integrity, availability and authentication and non-repudiation and accountability. These are some basic yet extremely significant measures to be kept in view.
Incorrect
A firm should have regard to confidentiality, integrity, availability and authentication and non-repudiation and accountability. These are some basic yet extremely significant measures to be kept in view.
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Question 17 of 20
17. Question
Which of the given statement could be a true solution to enable retail banking entities to navigate the immense scale of guidelines coming from all over the globe?
Correct
A true solution to enable retail banking entities to navigate the immense scale of guidelines coming from all over the globe is possible through the plan of determining who does what; process, coordination and risk mitigation are informed by the application. It Automates the work assigning process.
Incorrect
A true solution to enable retail banking entities to navigate the immense scale of guidelines coming from all over the globe is possible through the plan of determining who does what; process, coordination and risk mitigation are informed by the application. It Automates the work assigning process.
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Question 18 of 20
18. Question
A company will register its policy for preserving its activities stability, and its preparations for communicating and checking the adequacy and efficacy of this approach on a regular basis. A organization will designate:
Correct
Retaliation and deployment plans outlining the processes for the execution of business continuity services and associated contact details.
Incorrect
Retaliation and deployment plans outlining the processes for the execution of business continuity services and associated contact details.
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Question 19 of 20
19. Question
Despite gains already achieved in the system for organizational reform, several potential fields for structural reforms – building on international experience include:
Correct
While firms have growingly tapped into market funding such as bonds and commercial paper, the out-of-court restructuring framework hinges on the role of the main creditor banks. Uncertainty arises, therefore, regarding a loss sharing between bank creditors and nonbank creditors, as banks have less incentive to initiate debt restructuring and bear the brunt of restructuring.
Incorrect
While firms have growingly tapped into market funding such as bonds and commercial paper, the out-of-court restructuring framework hinges on the role of the main creditor banks. Uncertainty arises, therefore, regarding a loss sharing between bank creditors and nonbank creditors, as banks have less incentive to initiate debt restructuring and bear the brunt of restructuring.
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Question 20 of 20
20. Question
Pick out the correct statement regarding fraud response, reporting and the sharing of information.
Correct
Banks may provide compliance control systems, law enforcement reports, regulatory alerts and reporting protocols.
Incorrect
Banks may provide compliance control systems, law enforcement reports, regulatory alerts and reporting protocols.
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