Test 1057

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Subject: Risk Management in Banking and Insurance

Total Number of Question: 40

Time: 41 Minutes

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Which of the following best defines risk management?

Eliminating all risks in an organization

Identifying, assessing, and mitigating risks

Avoiding financial transactions

Increasing profit margins

None

Which risk is also known as undiversifiable risk?

Systematic risk

Unsystematic risk

Credit risk

Operational risk

None

The process of risk identification includes:

Recognizing potential risks

Ignoring low-impact risks

Only focusing on past risks

Eliminating all risks

None

Which of the following is NOT a financial risk?

Credit risk

Market risk

Operational risk

Business risk

None

Which of the following is NOT a function of risk management?

Risk identification

Risk retention

Risk speculation

Risk mitigation

None

Which of the following is a key strategy for managing credit risk?

Ignoring defaulters

Enhancing loan underwriting standards

Reducing credit scores

Avoiding all lending activities

None

Counterparty risk is a part of which type of risk?

Credit risk

Market risk

Liquidity risk

Operational risk

None

Which regulatory framework focuses on credit risk in banking?

Basel III

GDPR

ISO 31000

IFRS 9

None

Which ratio is commonly used to assess a bank’s credit risk exposure?

Capital Adequacy Ratio (CAR)

Price-to-Earnings Ratio (P/E)

Debt-to-Equity Ratio

Return on Investment (ROI)

None

10.

Which of the following helps in reducing credit risk?

Credit rating assessment

Random loan approvals

Ignoring borrower history

Avoiding documentation

None

11.

Which type of risk arises due to changes in interest rates?

Liquidity risk

Interest rate risk

Cyber risk

Legal risk

None

12.

Which of the following tools helps in measuring market risk?

Value at Risk (VaR)

Credit Score

Solvency Ratio

Combined Ratio

None

13.

A sudden decline in stock prices is an example of:

Operational risk

Credit risk

Market risk

Liquidity risk

None

14.

Which of the following is a market risk mitigation technique?

Diversification

Increasing loan defaults

Ignoring economic indicators

Avoiding all investments

None

15.

Which financial instrument is commonly used for hedging against market risk?

Derivatives

Fixed deposits

Bank loans

Equity shares

None

16.

Which of the following is an example of operational risk?

Data breach in a bank

Stock market fluctuations

Changes in currency exchange rates

Government policy changes

None

17.

Which risk arises due to failures in internal processes, people, or systems?

Credit risk

Operational risk

Market risk

Liquidity risk

None

18.

Which is an effective method to mitigate cybersecurity risks?

Ignoring cybersecurity threats

Implementing multi-factor authentication

Avoiding internet banking

Reducing employee training

None

19.

Phishing is a form of:

Credit fraud

Cyber attack

Market risk

Interest rate risk

None

20.

Which regulatory framework focuses on cybersecurity in banking?

Basel III

RBI IT Security Guidelines

IRDAI Act

SEBI Guidelines

None

21.

Which of the following is a key function of insurance companies in risk management?

Speculating in the stock market

Pooling and transferring risks

Avoiding financial regulations

Increasing investment risks

None

22.

Underwriting risk in insurance arises from:

Poor risk assessment

Low interest rates

Stock market fluctuations

High liquidity

None

23.

Which insurance principle states that an insured should not profit from a loss?

Principle of Utmost Good Faith

Principle of Indemnity

Principle of Contribution

Principle of Subrogation

None

24.

Reinsurance helps insurers by:

Increasing underwriting risks

Spreading and transferring risks

Reducing policyholder claims

Avoiding regulatory compliance

None

25.

Which type of insurance covers businesses from potential cyber threats?

Fire Insurance

Cyber Insurance

Marine Insurance

Health Insurance

None

26.

Liquidity risk arises when a bank is unable to:

Repay its short-term obligations

Invest in new projects

Issue new loans

Increase employee salaries

None

27.

Which ratio is used to measure a bank’s liquidity position?

Loan-to-Deposit Ratio

Return on Assets

Earnings per Share

Debt-to-Equity Ratio

None

28.

Stress testing in risk management is used to:

Evaluate a firm's response to extreme market conditions

Increase stock market investments

Reduce credit scores

Avoid risk assessment

None

29.

Which of the following is a key objective of risk governance in financial institutions?

Maximizing speculative risks

Ensuring transparency and accountability

Ignoring regulatory compliance

Avoiding risk assessments

None

30.

Which regulatory body oversees banking risk management in India?

Securities and Exchange Board of India (SEBI)

Reserve Bank of India (RBI)

Insurance Regulatory and Development Authority of India (IRDAI)

National Stock Exchange (NSE)

None

31.

Which framework is used globally for risk management and compliance in financial institutions?

COSO Framework

GDP Growth Model

Inflation Control Policy

SWOT Analysis

None

32.

Risk Appetite in banking refers to:

The number of customers a bank serves

The revenue a bank generates

The number of customers a bank serves

The amount of money deposited in a bank

None

33.

Which of the following is a key feature of risk-based supervision in banking?

Focus on high-risk areas

Avoiding regulatory checks

Random selection of banks for audits

Eliminating risk management functions

None

34.

Which type of audit ensures compliance with risk management policies?

Financial Audit

Risk-Based Internal Audit

Tax Audit

IT Audit

None

35.

What is the primary role of stress testing in banks?

Assessing the impact of extreme financial conditions

Improving daily banking operations

Reducing bank profits

Avoiding credit assessments

None

36.

Which of the following is a strategy used by insurance companies to mitigate underwriting risk?

Reinsurance

Speculative investments

Ignoring policyholder claims

Reducing capital reserves

None

37.

What does "Actuarial Risk" refer to in insurance?

The risk of incorrect risk assessment by actuaries

The risk of cyber fraud

The risk of stock market fluctuations

The risk of liquidity shortages

None

38.

Which risk management technique is commonly used for catastrophic insurance losses?

Catastrophe Bonds

Credit Default Swaps

Short Selling

Arbitrage Trading

None

39.

Which of the following is considered an emerging risk in financial services?

Climate Change Risk

Simple Interest Risk

Fixed Deposit Risk

Traditional Banking Risk

None

40.

What is the primary concern of ESG (Environmental, Social, and Governance) risk in banking?

Ethical and sustainable business practices

Increasing speculative trading

Avoiding corporate social responsibility

Ignoring regulatory norms

None

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