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PRMIA 8020 Exam Syllabus Topics:

Topic	Details
Topic 1	Risk Governance: This section of the exam measures the skills of Compliance Officers and covers the policies, structures, and processes that define how organizations oversee risk. It explores regulatory compliance, ethical considerations, and corporate governance frameworks to ensure accountability. A key skill measured is applying governance frameworks to organizational risk policies.
Topic 2	Case Studies: This section of the exam measures the skills of Business Risk Consultants and covers real-world applications of risk management concepts. It examines case studies on risk governance, assessment, and mitigation strategies across different industries. A key skill measured is analyzing historical risk events for strategic insights.
Topic 3	Risk Management Framework: This section of the exam measures the skills of Risk Managers and covers the development and implementation of structured approaches for risk identification, evaluation, and mitigation. It includes industry-standard frameworks that guide risk strategy and decision-making. A key skill measured is establishing a risk management framework for organizations.
Topic 4	Risk Modeling: This section of the exam measures the skills of Quantitative Risk Analysts and covers mathematical and statistical techniques used to predict risk scenarios. It explores model development, validation, and application in financial and operational risk management. A key skill measured is applying statistical models for risk prediction.

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PRMIA ORM Certificate - 2023 Update Sample Questions (Q18-Q23):

NEW QUESTION # 18
In the Basel III standardized approach for operational risk, what is the Business Indicator?

A. It is a non-financial-statement-based proxy for operational risk.
B. It is a scaling factor that is based on a bank's average historical losses.
C. It is a financial-statement-based proxy for operational risk.
D. It is a proxy for operational risks that relate to near-miss events.

Answer: C

Explanation:
Step 1: Definition of the Business Indicator (BI) in Basel III
The Business Indicator (BI) is a financial-statement-based metric used in Basel III's Standardized Approach for Operational Risk.
It replaces previous approaches by using financial figures (e.g., revenue, fees, interest income) to estimate operational risk exposure.
Step 2: Why Option D Is Correct
The BI uses financial-statement data to calculate operational risk capital requirements.
It acts as a proxy for a bank's operational risk exposure by linking operational risk to its financial size and complexity.
Step 3: Why the Other Options Are Incorrect
Option A ("Proxy for near-miss events") → Incorrect because BI is based on financial data, not near-miss risk events.
Option B ("Non-financial-statement-based proxy") → Incorrect because BI is explicitly derived from financial statements.
Option C ("Scaling factor based on historical losses") → Incorrect because BI does not use historical losses directly-it relies on financial-statement inputs.
PRMIA Risk Reference Used:
Basel III Operational Risk Framework - Defines the Business Indicator as a financial-statement-based metric.
PRMIA Operational Risk Guidelines - Explains the BI's role in capital calculations.

NEW QUESTION # 19
In relation to the template for writing policy documents, which one of the following pairings of requirements is correct? A well designed policy will include:

A. To whom the policy applies to and how an additional management report should be allocated to.
B. A list of exceptions for the family of board members.
C. To whom and in what form exceptions should be sought and the general exemptions e.g. areas to which the policy does not apply
D. A list of acceptable fonts and margin types.

Answer: C

Explanation:
Step 1: Key Elements of a Well-Designed Policy Document
A well-designed policy should include:
Scope - Who the policy applies to.
Exception Handling - How and where exceptions should be requested.
Accountability - Who is responsible for enforcement.
Step 2: Why Option C is Correct
A policy must clearly define exceptions and the process for requesting them.
It should also define areas where the policy does not apply to avoid confusion.
Step 3: Why the Other Options Are Incorrect
Option A ("List of exceptions for board members' families") → Incorrect because policies should apply consistently to all stakeholders.
Option B ("List of acceptable fonts and margin types") → Incorrect because formatting is secondary to content clarity.
Option D ("To whom the policy applies and an additional management report") → Incorrect because policy scope should not include unnecessary reports.
PRMIA Risk Reference Used:
PRMIA Policy Writing Guidelines - Defines policy structure and exception handling.
ISO 19600 Compliance Management Standard - Supports clear, well-documented policies.
Final Conclusion:
A well-designed policy clearly defines exceptions and their handling process, making Option C the correct answer.

NEW QUESTION # 20
For credit risk losses containing operational risk elements that have been historically included in an organizations' credit risk database how should the loss amount be treated?

A. The entire loss amount is treated as operational risk.
B. The entire loss amount is treated as credit risk, but the loss is entered as a memorandum within the operational loss database and not used for capital modeling purposes.
C. The entire loss amount is treated as credit risk
D. The loss amount is split into credit and operational risk components.

Answer: D

Explanation:
Understanding Credit Risk and Operational Risk Overlap
In some cases, credit risk losses contain elements of operational risk, such as fraud, documentation errors, or IT failures affecting credit transactions.
Basel II and III frameworks require institutions to distinguish between pure credit risk losses and operational risk components within those losses.
Treatment of Losses
The credit-related portion is accounted for under credit risk capital calculations.
The operational risk portion (e.g., fraud-related losses) should be classified separately and included in operational risk databases for risk measurement.
Why Answer C is Correct
Basel III and PRMIA recommend a clear split between credit risk and operational risk components to ensure accurate risk modeling.
If operational risk elements are ignored, an organization may underestimate its true operational risk exposure.
Why Other Answers Are Incorrect
Option
Explanation:
A . The entire loss amount is treated as credit risk.
Incorrect - This ignores operational risk components that should be accounted for separately.
B . The entire loss amount is treated as operational risk.
Incorrect - Credit risk losses are typically dominant in lending-related losses and should not be fully classified as operational risk.
D . The entire loss amount is treated as credit risk, but the loss is entered as a memorandum within the operational loss database and not used for capital modeling purposes.
Incorrect - The operational risk portion must be considered for capital modeling, not just recorded as a memo.
PRMIA Reference for Verification
Basel II & III Guidelines on Credit and Operational Risk Integration
PRMIA Operational Risk Framework

NEW QUESTION # 21
What are some of the properties of Bottom-Up KRIs?

A. Selected by local management: tied to internal loss events at the legal entity, country, business and / or product level, reported daily, weekly or monthly.
B. Selected by local management, based on key controls or weaknesses identified by audit reports, reported on quarterly.
C. Seated by senior management: tied to internal loss events at the legal entity, country, business and / or product level, reported.
daily, weekly or monthly.
D. Are not used due to changes in regulations.

Answer: A

Explanation:
Definition of Bottom-Up KRIs
Bottom-Up Key Risk Indicators (KRIs) are identified at the operational level, focusing on localized risks within business units.
They are tied to actual internal loss events and reported frequently (daily, weekly, or monthly) to capture ongoing trends.
Key Properties of Bottom-Up KRIs
Selected by local management → Ensures relevance to specific business areas.
Tied to internal loss events → Helps in tracking risk patterns within specific legal entities, countries, or business units.
Reported frequently → Allows for timely risk detection and mitigation.
Why Answer D is Correct
Bottom-up KRIs focus on localized risk exposure and are monitored frequently to track operational changes.
Why Other Answers Are Incorrect
Option
Explanation:
A . Seated by senior management: tied to internal loss events at the legal entity, country, business, and/or product level, reported daily, weekly, or monthly.
Incorrect - Senior management sets top-down KRIs, while bottom-up KRIs are managed locally.
B . Selected by local management, based on key controls or weaknesses identified by audit reports, reported quarterly.
Incorrect - While audit reports are useful, bottom-up KRIs are based on loss events, not just audit findings. Quarterly reporting is too infrequent.
C . Are not used due to changes in regulations.
Incorrect - Bottom-up KRIs remain essential despite regulatory changes.
PRMIA Reference for Verification
PRMIA Risk Indicator Best Practices
Basel Committee's Risk Measurement and Reporting Guidelines

NEW QUESTION # 22
For the TSB case what was the cause of the outage at the heart of the case?

A. Sub-standard risk pricing and risk management left millions of people locked out of their accounts for weeks.
B. A failed attempts to move customers to a new IT system left millions of people locked out of their accounts for weeks.
C. Their IT models did not work if prices were discontinuous.
D. A liquidity squeeze by a major hedge-fund via margin calls on trading positions resulted in the collapse of their website.

Answer: B

Explanation:
Step 1: Understanding the TSB Case
The TSB outage in 2018 was caused by a failed IT migration from its old banking system to a new one.
The transition locked millions of customers out of their accounts for weeks, resulting in financial losses and reputational damage.
Step 2: Why Option C Is Correct
TSB attempted to move customer data to a new banking platform, but serious defects in the migration process led to service failures.
PRMIA and UK Financial Conduct Authority (FCA) reports confirmed that poor IT risk management was a key failure.
Step 3: Why the Other Options Are Incorrect
Option A ("Liquidity squeeze by hedge-fund")
Incorrect because TSB's failure was due to IT migration issues, not a liquidity crisis.
Option B ("Sub-standard risk pricing and risk management")
Incorrect because pricing models were not the cause-it was an IT system failure.
Option D ("IT models did not work if prices were discontinuous")
Incorrect as this issue is more common in high-frequency trading failures, not banking system outages.
PRMIA Risk Reference Used:
UK FCA Investigation on TSB Incident - Confirms IT migration failure as root cause.
PRMIA IT Risk Management Framework - Highlights risks of major IT transitions.
Final Conclusion:
The TSB outage was caused by a failed IT migration, making Option C the correct answer.

NEW QUESTION # 23
......

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