FRM Exam 1 2023 with 100% correct answers

Shortcomings of risk metrics -May not scale over time -Historical data may be meaningless -Not designed to account for catastrophes -VaR says nothing about losses in excess of VaR -May not handle sudden illiquidity Importance of communication for risk managers Need to assess risk and tell management so they can determine which risks to take on Ways firms can fail to account for risks -Firm may ignore known risk -Somebody in firm may know about risk, but it's not captured by models -Realization of a truly unknown risk Ways risk can be mismeasured -Wrong distribution -Historical sample may not apply Roles of risk management -Asses firm risks -Communicate risks -Manage and monitor risks Practical considerations related to ERM implementation -Designate ERM champion - usually CRO -Make ERM part of firm culture -Determining all possible risks -Quantifying operational and strategic risks -Integrating risks (dependencies) -Lack of risk transfer mechanisms -Monitoring Models used in ERM framework Modeling approach is typically between statistical analytic models and structural simulation models Risk types addressed by ERM -Hazard -Financial -Operational -Strategic Traits of ERM -Enterprise Risk Management -ERM is a discipline - culture of enterprise -ERM applies to all industries -ERM is not just defensive, adds value -ERM encompasses all risks -ERM addresses all stakeholders