©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 1:26 PM A+
FRM 2: Book 3 Exam Questions And
Answers |Latest 2025 | Guaranteed Pass.
Lines of Defense to control operational risks - Answer✔1) Business line management
2) An independent operational risk management function
3) Independent reviews of operational risk and risk management
Corporate Operatinoal Risk Function (CORF) - Answer✔A functionally independent group that
complements the business lines' risk management operations. Responsible for designing,
implementing, and maintaining the bank's operational risk framework.
11 Principles of Operational Risk Management - Answer✔Board should...
1) Lead strong risk management culture
2) Have a Risk framework
3) Review and approval of framework
4) Approve risk appetite and risk tolerance statements
5) Develop a well-defined governance structure
6) Understand the risks, and incentives related to those risks, inherent in the bank's business
lines and processes
7) Have approval process of new business lines
8) Have a process for monitoring operational risks and material exposures to losses
9) Have internal controls, risk mitigation, and risk transfer strategies
10) Business operations must be resilient
1|P a g e
, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 1:26 PM A+
11) Have disclosures that are clear
Lead a Strong Risk Management Culture - Answer✔Have an ethics policy and provide risk
training
Have a Risk Framework - Answer✔Thoroughly understand the nature and complexity of the
risks.
Developed and fully integrate risk framework into the overall risk management processes
Review and approval of framework - Answer✔Establish a culture and process, regularly review
the framework, provide management with guidance, have the framework independently
reviewed, ensure management is following best practices, and establish clear lines of
management responsibility
Approve risk appetite and risk tolerance statements - Answer✔Consider all risks and
periodically review risk appetites and tolerance statements
Develop a well-defined governance structure - Answer✔Establish systems to report and track
operational risks, provide specific policies and procedures, communicate them clearly, ensure a
sufficient stature, train staff, and ensure governance structure matches the firm's
Understand the risks, and incentives related to those risks, inherent in the bank's business lines
and processes - Answer✔Consider both internal and external
Have approval process of new business lines - Answer✔Have an approval process for new
products and processes.
Have a process for monitoring operational risks and material exposures to losses -
Answer✔Continuously improve reporting, ensure reports are timely and include breaches of
appetite, tolerance, thresholds and limits, details of recent operational risk events, and external
events that may impact the firm.
2|P a g e
FRM 2: Book 3 Exam Questions And
Answers |Latest 2025 | Guaranteed Pass.
Lines of Defense to control operational risks - Answer✔1) Business line management
2) An independent operational risk management function
3) Independent reviews of operational risk and risk management
Corporate Operatinoal Risk Function (CORF) - Answer✔A functionally independent group that
complements the business lines' risk management operations. Responsible for designing,
implementing, and maintaining the bank's operational risk framework.
11 Principles of Operational Risk Management - Answer✔Board should...
1) Lead strong risk management culture
2) Have a Risk framework
3) Review and approval of framework
4) Approve risk appetite and risk tolerance statements
5) Develop a well-defined governance structure
6) Understand the risks, and incentives related to those risks, inherent in the bank's business
lines and processes
7) Have approval process of new business lines
8) Have a process for monitoring operational risks and material exposures to losses
9) Have internal controls, risk mitigation, and risk transfer strategies
10) Business operations must be resilient
1|P a g e
, ©BRIGHTSTARS 2025 ALL RIGHTS RESERVED 1:26 PM A+
11) Have disclosures that are clear
Lead a Strong Risk Management Culture - Answer✔Have an ethics policy and provide risk
training
Have a Risk Framework - Answer✔Thoroughly understand the nature and complexity of the
risks.
Developed and fully integrate risk framework into the overall risk management processes
Review and approval of framework - Answer✔Establish a culture and process, regularly review
the framework, provide management with guidance, have the framework independently
reviewed, ensure management is following best practices, and establish clear lines of
management responsibility
Approve risk appetite and risk tolerance statements - Answer✔Consider all risks and
periodically review risk appetites and tolerance statements
Develop a well-defined governance structure - Answer✔Establish systems to report and track
operational risks, provide specific policies and procedures, communicate them clearly, ensure a
sufficient stature, train staff, and ensure governance structure matches the firm's
Understand the risks, and incentives related to those risks, inherent in the bank's business lines
and processes - Answer✔Consider both internal and external
Have approval process of new business lines - Answer✔Have an approval process for new
products and processes.
Have a process for monitoring operational risks and material exposures to losses -
Answer✔Continuously improve reporting, ensure reports are timely and include breaches of
appetite, tolerance, thresholds and limits, details of recent operational risk events, and external
events that may impact the firm.
2|P a g e
