©THESTAR 2024/2025 ALL RIGHTS RESERVED.
LPM Exam Questions And Correct Answers
100% Verified.
LPM includes what? - Answer✔All systems/process/controls used by the board and
management to plan/ direct/organize/control lending operations
What is the primary goal of LPM? - Answer✔Manage institution credit risk exposure
What is credit risk? - Answer✔The potential for losses from borrowers failing to pay loans
(repayment and collateral risk)
What are the three causes of credit risk? - Answer✔Political, economic and environmental
(weaknesses in LPM are also significant drivers)
Risk ID and LPM tell us what? - Answer✔Risk ID = what is there
LPM = how and why it got there
LPM depends on what? - Answer✔Accurate risk ID
Does LPN make current risk go away? - Answer✔No, but it better positions institutions for
downturns
Management information systems are what kind of control? - Answer✔Preventative
An adequate MIS provides what? - Answer✔Sedation/accurate/timely information on
conditions/ quality/performance of loan portfolio to enable timely/prudent board and
management decisions
Board MIS policies should what? - Answer✔1. Communicate board expectations
2. ID reporting needs and when to report
3. Ensure complete/usable/accurate information
4. Address automation and integration
What is the key to data? - Answer✔Accuracy
Effective internal reporting is essential for what? - Answer✔Effective portfolio management
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
What does portfolio management reporting do? - Answer✔1. Ensure lending operations are in
line with everything
2. Provides assurance that loan portfolio objectives are being achieved
What are the steps to implement change? - Answer✔1. ID need - Monitors/detective
controls/eval. tools
2. Determine impact/cause - data/analytical tools
3. Implement change - board planning/policy/controls
What is key to implementing change? - Answer✔Accurate/timely data and effective reporting
What is directing? - Answer✔Basic function of management.
Guide/motivate/lead/influence toward goal attainment
What key components of LPM are increasing in importance? - Answer✔1. Job
descriptions/performance appraisals
2. management supervision/feedback
3. staff training/meetings
What are two big key components in the primary source of direction for portfolio
management? - Answer✔Policies and procedures
Board policies do what? - Answer✔Define board expectations, flexible, acceptable risk/lending
practices
Procedures define what? - Answer✔Management framework for implementing policy
Policies + procedures = what? - Answer✔Credit philosophy and culture
Detective controls do want? - Answer✔Search for errors after they occur, more expensive
What are some preventative control examples? - Answer✔Policies and procedures, risk
parameters, LUS, BP, info system, mgmt/board reports, risk ID, performance/compensation,
DLA
What are five primary detective controls? - Answer✔1. Management oversight
2. internal audit and ICR
3. independent audit/credit/appraisal review, 4. external audit
5. CA plan
2|Page
LPM Exam Questions And Correct Answers
100% Verified.
LPM includes what? - Answer✔All systems/process/controls used by the board and
management to plan/ direct/organize/control lending operations
What is the primary goal of LPM? - Answer✔Manage institution credit risk exposure
What is credit risk? - Answer✔The potential for losses from borrowers failing to pay loans
(repayment and collateral risk)
What are the three causes of credit risk? - Answer✔Political, economic and environmental
(weaknesses in LPM are also significant drivers)
Risk ID and LPM tell us what? - Answer✔Risk ID = what is there
LPM = how and why it got there
LPM depends on what? - Answer✔Accurate risk ID
Does LPN make current risk go away? - Answer✔No, but it better positions institutions for
downturns
Management information systems are what kind of control? - Answer✔Preventative
An adequate MIS provides what? - Answer✔Sedation/accurate/timely information on
conditions/ quality/performance of loan portfolio to enable timely/prudent board and
management decisions
Board MIS policies should what? - Answer✔1. Communicate board expectations
2. ID reporting needs and when to report
3. Ensure complete/usable/accurate information
4. Address automation and integration
What is the key to data? - Answer✔Accuracy
Effective internal reporting is essential for what? - Answer✔Effective portfolio management
1|Page
, ©THESTAR 2024/2025 ALL RIGHTS RESERVED.
What does portfolio management reporting do? - Answer✔1. Ensure lending operations are in
line with everything
2. Provides assurance that loan portfolio objectives are being achieved
What are the steps to implement change? - Answer✔1. ID need - Monitors/detective
controls/eval. tools
2. Determine impact/cause - data/analytical tools
3. Implement change - board planning/policy/controls
What is key to implementing change? - Answer✔Accurate/timely data and effective reporting
What is directing? - Answer✔Basic function of management.
Guide/motivate/lead/influence toward goal attainment
What key components of LPM are increasing in importance? - Answer✔1. Job
descriptions/performance appraisals
2. management supervision/feedback
3. staff training/meetings
What are two big key components in the primary source of direction for portfolio
management? - Answer✔Policies and procedures
Board policies do what? - Answer✔Define board expectations, flexible, acceptable risk/lending
practices
Procedures define what? - Answer✔Management framework for implementing policy
Policies + procedures = what? - Answer✔Credit philosophy and culture
Detective controls do want? - Answer✔Search for errors after they occur, more expensive
What are some preventative control examples? - Answer✔Policies and procedures, risk
parameters, LUS, BP, info system, mgmt/board reports, risk ID, performance/compensation,
DLA
What are five primary detective controls? - Answer✔1. Management oversight
2. internal audit and ICR
3. independent audit/credit/appraisal review, 4. external audit
5. CA plan
2|Page
