Portfolio Management MCQ - Portfolio Management Section 2

41 The element of risk management that most likely makes up the analytical component of the process is:

Risk identification and measurement is the quantitative part of the process. It involves identifying the risks and summarizing their potential quantitative impact. Communication and risk governance are largely qualitative.

42 The element of risk management which involves action when risk exposures are found to be out of line with risk tolerance is:

Risk monitoring, mitigation, and management require recognizing and taking action when these (risk exposure and risk tolerance) are not in line. Risk governance involves setting the risk tolerance. Risk identification and measurement involves identifying and measuring the risk exposures.

43 The factors a risk management framework should address include all of the following except:

While risk infrastructure, which a risk management framework must address, refers to the people and systems required to track risk exposures, there is no requirement to actually name the responsible individuals.

44 Which of the following is the correct sequence of events for risk governance and management that focuses on the entire enterprise? Establishing:

In establishing a risk management system, determining risk tolerance must happen before specific risks can be accepted or reduced. Risk tolerance defines the appetite for risk. Risk budgeting determine how or where the risk is taken and quantifies the tolerable risk by specific metrics. Risk exposures can then be measured and compared against the acceptable risk.

45 Who would be the least appropriate for controlling the risk management function in a large organization?

A chief risk officer or a risk management committee is an individual or group that focuses primarily on risk management. A chief financial officer, may supervise a CRO, and would likely have some involvement in a risk management committee, but a CFO has broader responsibilities, cannot provide the specialization and exclusive attention to risk management that is necessary in a large organization.