Welcome to your International Navodaya Chamber of Commerce (INCOC) Platform ! Subject: Risk Management in Banking and InsuranceTotal Number of Question: 40Time: 41 MinutesPlease check your email after completion of test for result.All the best... Name Phone No Email State 1. Interest Rate Risk' arises when: The risk of loan defaults increases Market interest rates change, affecting asset and liability values There is a breach of customer data Currency exchange rates fluctuate None 2. Risk Mitigation' involves: Avoiding all risks completely Taking deliberate actions to reduce the impact or likelihood of risks Ignoring minor risks to save costs Outsourcing all risk-related responsibilities None 3. Which of the following is a common measure to control operational risk? Increasing leverage Implementing internal controls and audits Reducing capital reserves Hedging using futures contracts None 4. The 'Reinsurance Treaty' is an agreement between: Two policyholders An insurer and a reinsurer A bank and an insurer Two financial regulators None 5. Concentration Risk' in banking occurs when: Banks have a diversified loan portfolio Banks focus too heavily on a single borrower, sector, or geography Interest rates remain stable over time There is a high inflow of customer deposits None 6. What is the main objective of 'Operational Risk Management' frameworks like RCSA (Risk and Control Self-Assessment)? Ensure regulatory compliance Identify, assess, and mitigate operational risks Increase revenue generation Monitor interest rate changes None 7. Insurance Deductibles' are used to: Increase the premium amount Transfer risks to the policyholder by requiring them to bear part of the loss Reduce the coverage provided by the insurer Enhance the claim settlement process None 8. In risk management, 'Scenario Analysis' is primarily used to: Eliminate risks entirely Evaluate the impact of hypothetical adverse conditions Maximize operational efficiency Determine premium pricin None 9. Systematic Risk' is best described as: Risk that can be eliminated through diversification Risk affecting the entire financial system or economy Risk arising from operational failures Risk limited to a specific asset or organization None 10. Portfolio Diversification' is a strategy to: Increase market share Spread investments across various assets to reduce risk Concentrate investments in a single sector for higher returns D) Eliminate all financial risks Eliminate all financial risks None 11. Liquidity Risk' in banking arises when: A bank has sufficient liquid assets to meet obligations A bank is unable to meet short-term financial commitments Interest rates fluctuate adversely Customer demand for loans increases None 12. Loss Adjustment Expense' (LAE) in insurance refers to: Costs incurred in settling claims Premium refunds to policyholders Discounts given to attract new customers The loss ratio for an insurer None 13. Regulatory Arbitrage' refers to: Complying with all regulations Exploiting differences in regulations across jurisdictions to reduce regulatory burden C) Maximizing profits through financial trading D) Implementing stricter internal controls Maximizing profits through financial trading Implementing stricter internal controls None 14. The 'Insurance Cycle' refers to: The process of claim settlement holder Fluctuations in insurance premiums and underwriting profitability over time The lifecycle of a policyholder The duration of an insurance policy None 15. The 'Net Premium' in insurance is: The gross premium minus operating expenses The premium required to cover expected claims and expenses The total premium including administrative charges The premium paid by policyholders after tax deduction None 16. Which of the following is a characteristic of 'Proportional Reinsurance'? The reinsurer covers a specific portion of each policy The reinsurer pays for all losses after a certain threshold The reinsurer provides coverage without sharing premiums The reinsurer takes on all risks from the insurer None 17. In Basel III, the 'Capital Conservation Buffer' is designed to: Reduce operational expenses Ensure banks maintain additional capital during normal times to absorb losses Eliminate the need for risk assessments Maximize profits during economic booms None 18. Risk Appetite' in an organization is: The total risk faced by the organization The level of risk an organization is willing to accept in pursuit of its objectives The process of identifying all potential risks The likelihood of a risk event occurring None 19. Reputational Risk' can be caused by: Regulatory compliance Negative media coverage or unethical behavior Stable market conditions Increased profitability None 20. Actuarial Models' in insurance are used for: Analyzing customer satisfaction Predicting future liabilities and pricing policies Increasing market share Managing operational risks None 21. The 'Solvency Margin' in insurance ensures that: An insurer can meet its long-term obligations Policies are issued quickly Customers are compensated promptly Regulatory guidelines are followed None 22. Credit Derivatives' are financial instruments used to: Hedge credit risk exposures Increase operational efficiency Reduce underwriting risks Eliminate liquidity risks None 23. The 'Claims Incurred' ratio in insurance is: Claims paid ÷ Total premium collected Claims paid ÷ Total policies issued Claims outstanding ÷ Total reserves Claims denied ÷ Total claims submitted None 24. Enterprise Risk Management' (ERM) refers to: Managing only operational risks A holistic approach to managing all risks across an organization Focusing solely on financial risks Avoiding all risks completely None 25. Risk Tolerance' is best described as: The maximum amount of risk an organization is willing to take The total risk faced by the organization The likelihood of risk events occurring The process of identifying potential risk None 26. Claims Reserves' in insurance are: Premiums set aside to pay future claims Discounts offered to customers Refunds given to policyholders None 27. The 'Combined Ratio' below 100% in insurance indicates: A loss-making position An underwriting profit Operational inefficiency Market share growth None 28. Exposure at Default' (EAD) in credit risk refers to: The likelihood of a borrower defaulting The amount expected to be outstanding at the time of default The interest rate charged on loans The total assets of the borrower None 29. The 'Solvency II' framework focuses on: Banking regulations Insurance regulations, including capital and risk management standards Stock market compliance Real estate investments None 30. Key Risk Indicators' (KRIs) help organizations to: Predict potential risk events and monitor risk exposure Maximize profitability Evaluate customer satisfaction Assess past performance None 31. Duration Gap Analysis' is a tool for managing: Credit Risk Interest Rate Risk Operational Risk Reputational Risk None 32. Loss Frequency' in risk management refers to: The severity of loss during a risk event The number of times a risk event occurs over a period The total cost of a risk event The probability of a risk event happening None 33. Anti-Money Laundering' (AML) measures in banking aim to: Enhance profitability Prevent financial crimes like money laundering Improve operational efficiency Increase customer base None 34. Moral Hazard' in insurance is mitigated by: Increasing premiums for high-risk customers Requiring co-payments or deductibles in policies Avoiding high-risk customers entirely Reducing claim settlements None 35. Monte Carlo Simulation' in risk management is used to: Assess customer satisfaction Model the impact of various risk scenarios using random variables Increase marketing effectiveness Enhance regulatory compliance None 36. The primary objective of 'Risk Aggregation' is to: Eliminate all risks from an organization Understand the overall exposure by consolidating individual risks C) Focus on low-impact risks D) Reduce operational costs Focus on low-impact risks Reduce operational costs None 37. Liquidity Coverage Ratio' (LCR) ensures that: Banks have enough liquidity to cover short-term obligations in a stress scenario Banks maintain high levels of profitability Banks reduce their reliance on long-term funding Banks increase customer deposits None 38. In risk management, 'Probability of Default' (PD) refers to: The expected loss from default The likelihood of a borrower failing to meet financial obligations The amount of exposure at default The time to recovery after default None 39. The purpose of a 'Risk Heat Map' is to: Prioritize risks based on their impact and likelihood Eliminate all risks in a project Determine profitability levels Highlight past risk event None 40. Operational Resilience' refers to: Rhe ability of an organization to continue operations during and after disruptions The efficiency of internal controls The speed of risk identification The profitability of financial products None 1 out of 4 Great job on taking the INCOC Test! 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