NAFCU - NCRM Study Guide Questions And 100% Correct
Answers 100% Verified
ERM Program Requirements - ANSWER - Control activities - a process of P&P to ensure
the credit union is effectively responding to risks
- Risk response - management should select a response (accept, avoid, share, reduce)
and develops a COA for the risk in alignment to risk appetite and risk acceptance
- Risk assessment - the CU should be constantly assessing risk, keeping in mind the
likelihood and impact of various scenarios
- Clear objectives - should have clear strategic, operations, reporting, and compliance
objectives
- Event identification - the CU should constantly identify internal and external events that
may affect objectives
- Established risk culture - the tone comes from the top, sets the standard as to how CUs
should deal with risk
What is Risk Impact? - ANSWER A measure of the probability that something will occur
and severity of its results
Risk Appetite - ANSWER The amount of risk a company is willing to accept to achieve its
goals and objectives. To avoid undue risk, risk appetite must be in alignment with
company strategy.
Risk Appetite - ANSWER The level, amount, or volume of risk that an organization or
individual will tolerate.
What is ERM (Enterprise Risk Management) role? - ANSWER - Provides Reasonable
assurance to management and the board
- Identify and manage risk entity wide by closing gaps and removing silos
- Improve resource management
, What are the risk decisions? - ANSWER Accept: continue activity, appropriate in cases
where risk is within acceptable tolerance or there is no cost effective risk reduction
method available
Reduce: Mitigate the likelihood and/or impact
Share: Transfer part of the risk to another party. i.e., insurance
Avoid: Remove the exposure to the risk all together
What are the NCUA Risk Program Foundations? - ANSWER Policies: set the standard
and COA
Processes: procedures and practices that govern day 2 day activities
Personnel: staff and managers that perform the process
Controls systems: tools and information system that measure performance and
assesses the current state of the process
What does CAMELS stand for? - ANSWER Capital adequacy
Asset quality
Management
Earnings
Liquidity
Sensitivity to market risk
What is market risk? - ANSWER Easy to quantify and includes risks such as:
Credit risk
Interest rate risk
Liquidity risks
Answers 100% Verified
ERM Program Requirements - ANSWER - Control activities - a process of P&P to ensure
the credit union is effectively responding to risks
- Risk response - management should select a response (accept, avoid, share, reduce)
and develops a COA for the risk in alignment to risk appetite and risk acceptance
- Risk assessment - the CU should be constantly assessing risk, keeping in mind the
likelihood and impact of various scenarios
- Clear objectives - should have clear strategic, operations, reporting, and compliance
objectives
- Event identification - the CU should constantly identify internal and external events that
may affect objectives
- Established risk culture - the tone comes from the top, sets the standard as to how CUs
should deal with risk
What is Risk Impact? - ANSWER A measure of the probability that something will occur
and severity of its results
Risk Appetite - ANSWER The amount of risk a company is willing to accept to achieve its
goals and objectives. To avoid undue risk, risk appetite must be in alignment with
company strategy.
Risk Appetite - ANSWER The level, amount, or volume of risk that an organization or
individual will tolerate.
What is ERM (Enterprise Risk Management) role? - ANSWER - Provides Reasonable
assurance to management and the board
- Identify and manage risk entity wide by closing gaps and removing silos
- Improve resource management
, What are the risk decisions? - ANSWER Accept: continue activity, appropriate in cases
where risk is within acceptable tolerance or there is no cost effective risk reduction
method available
Reduce: Mitigate the likelihood and/or impact
Share: Transfer part of the risk to another party. i.e., insurance
Avoid: Remove the exposure to the risk all together
What are the NCUA Risk Program Foundations? - ANSWER Policies: set the standard
and COA
Processes: procedures and practices that govern day 2 day activities
Personnel: staff and managers that perform the process
Controls systems: tools and information system that measure performance and
assesses the current state of the process
What does CAMELS stand for? - ANSWER Capital adequacy
Asset quality
Management
Earnings
Liquidity
Sensitivity to market risk
What is market risk? - ANSWER Easy to quantify and includes risks such as:
Credit risk
Interest rate risk
Liquidity risks
