MODEL QP 4 ERM & RMD 2025

What is a major proposed change in computing the market risk buffer under the revised Economic Capital Framework (ECF)?

• Excluding foreign currency assets

• Considering only off-balance sheet items

• Reducing the confidence level to 90%

• Adopting an integrated approach including off-balance sheet items and minor currency assets

Which international recognition did the Reserve Bank receive for its risk management practices in 2024?

• ‘Risk Manager of the Year’ by Central Banking, UK

• ISO Risk Certification

• World Bank ERM Award

• IMF Gold Standard in Risk Control

Under ERM, which new framework is being developed to assess the Reserve Bank’s market portfolio in 2025–26?

• Framework for managing reputational risk

• Cyber threat detection framework

• Risk-based audit framework

• Liquidity risk stress testing framework

What is the primary responsibility of the Risk Management Department (RMD) within the Reserve Bank’s risk framework?

• Formulating and operationalising the ERM framework

• Conducting external audits

• Approving monetary policy tools

• Supervising commercial banks

Risk Registers (RR) constitute an important pillar of the ERM Framework of the Bank. RRs are repository of all the processes/activities undertaken by a Business Area (BA) along with their identified risks and are prepared using a ____________ approach. It contains the description of the risks in each process and the nature as well as degree/rating of Inherent Risk and Residual Risk.

• Top-down

• Bottom-Flat

• Top-Up

• Bottom-Up

What does the Expected Shortfall (ES) in the Economic Capital Framework (ECF) refer to?

• Average surplus not transferred to the government

• Risk assessment measure for extreme market loss

• Projected income deficit from open market operations

• Gap in the government’s fiscal deficit

Which of the following statements is TRUE regarding the revised Contingent Risk Buffer (CRB)?

• It includes buffers for monetary, financial stability, credit and operational risks

• It will now be maintained at a fixed rate of 5%

• It includes buffers for exchange rate volatility

• It is completely removed under the new framework

Which of the following is NOT one of the guiding principles of the Reserve Bank’s Enterprise-wide Risk Management (ERM) framework?

• Centralised decision-making

• Robust governance

• Proportionality

• Accountability

What is the structure of the Reserve Bank’s risk governance framework?

• Dual-layered involving the RMD and Audit Department

• Decentralised risk ownership without oversight

• Outsourced entirely to external risk consultants

• Three-tiered involving Central Board, Audit and Risk Sub-Committee, and RMC

In the Reserve Bank’s three-tier internal risk management framework, what role does the Risk Management Department (RMD) play?

• First line of defence

• Second line of defence

• Third line of defence

• External advisory role