PRMIA PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics 8004 Exam Dumps: Updated Questions & Answers (October 2025)

Incentive plans have risk management implications

Front and back offices need to be independent

Large profits can be an indicator of risk

All of the above

I, II and III only

I, III and IV only

I, II and IV only

All of these are expectations of the Organization as a Whole

Always generate credit risk to both counterparties

Create credit risk only for the buyer (due to default by the seller) provided the premium is due, and paid, at contract initiation

Create no credit risk, since the buyer need not exercise the option

Usually create credit risk only for the seller (to default by the buyer)

Define the organization's definition of risk management as articulated by the Board in clear and uncertain terms

Include financial risk management, compliance and external reporting and, to the extent that resources allow, should exclude legal or accounting

Be independently staffed and report to an employee who is on the Executive Committee (Operating Committee) but who is NOT a business unit leader

Review continually the application of the Principles of Good Governance to the Risk Management Infrastructure, financial accounting and reporting infrastructure and the organization as a whole

Lending to consumers and small businesses.

Deposit taking activities which generated net interest income.

The provision of fee based services to its customers.

Complex derivative trades based on volatility indices.

I and III only

III only

III and IV only

All of these were key elements of the problems at LTCM

The general downturn in the economy of the US

By lowering its own credit underwriting standards

Acquisitions like Long Beach and Providian

Catastrophic losses in its own credit card division

Bob Citron engaged in risky strategies to benefit personally

Bob Citron tried to "ride the yield curve"

Bob Citron heavily leveraged his positions using repos

Citron's losses were eventually exposed by massive margin calls

unhedged

hedged using exchange-traded futures with longer maturities than the retail contracts

hedged using exchange-traded futures with shorter maturities than the retail contracts

fully hedged using exchange-traded futures of the same maturities as the retail contracts

relied almost entirely on Fortress Re's management team for information on the risks in its portfolio

relied on the information it received from other members of the reinsurance pool to manage its risks

had a full understanding from Fortress Re of the risks in the pool

had a full understanding from other members of the pool of the pool's liabilities