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Exam Code: 8004
Exam Name: PRM Certification - Exam IV: Case Studies; Standards: Governance, Best Practices and Ethics
Updated: Sep 05, 2026
Q & A: 112 Questions and Answers
8004 Free Demo download
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| Section | Objectives |
|---|---|
| Topic 1: Governance, Standards and Regulatory Frameworks | - Risk governance principles in financial institutions - Regulatory expectations and compliance structures |
| Topic 2: Case Study Application | - Integrated risk assessment scenarios - Governance and ethics decision analysis |
| Topic 3: Ethics and Professional Standards | - Professional conduct and ethical responsibilities - Industry codes of ethics and decision-making standards |
| Topic 4: Best Practices in Risk Management | - Enterprise risk management frameworks - Operational and financial risk controls |
Question 1
Which of the following would have contributed to noticing and preventing Leeson's violations at Barings?
A. Recognition that large profits can be an indicator of higher risk
B. Separation of front and back offices
C. More senior level involvement at Barings regarding use of derivatives
D. All of the above
Question 2
Washington Mutual's acquisition of Long Beach Financial changed its business model and increased its credit loss profile because
A. Of a general deterioration of credit quality generally
B. the two banks were focussed in different markets
C. The resulting loss rate for Washington Mutual was more than 3 times higher than other mortgage lenders tracked by the FDIC
D. Long Beach Financial had losses which it hadn't realized at the time of the takeover
Question 3
Corporate Governance ...
A. Eliminates risk to the greatest extent possible
B. Is defined as business decision making predicated on a belief in potential rewards, balanced with the knowledge, understanding and appreciation of the risk taken to pursue those potential rewards
C. Is defined as the assembled knowledge and wisdom of the collective stakeholders in the organization, set to maximize shareholder value
D. Is defined as that which is best practiced within an enterprise risk management framework, guided by the PRMIA Standards of Best Practice, Conduct and Ethics above all else
Question 4
A risk manager has just completed a risk assessment project. The report has been given to the risk manager's direct supervisor, who refuses to escalate the material issues raised in the report. Further, the direct supervisor edits the report to remove the section describing the material risk, who then submits it to the firm's Executive Committee.
According to the PRMIA Standards of Best Practice, Conduct and Ethics (Code of Conduct), which of the following actions is most appropriate:
A. The risk manager has submitted the report to their direct supervisor and their obligation ends at this point, nothing further should be done
B. The risk manager should attempt to resolve the conflict with the direct supervisor, but if that does not work, they should contact the Whistle-Blowing Hotline of the organization. If no such hot-line is in place, they should contact the PRMIA Ethics Committee
C. If the risk manager deems it appropriate, he / she should send a copy of the original report to the CEO
D. Escalation of the issue is against the Code of Conduct because one should respect the administrative structure of the organization
Question 5
Boards of Directors, including Audit and Risk Committees must review thoroughly compensation plans of potentially "highly compensated positions" for:
I competitive market conditions
II ensuring compliance with their corporate risk appetite and fiduciary responsibility to shareholders III ensuring any discretionary bonus plans are geared towards keeping high income / revenue generators IV reporting all such personnel to the local regulator
A. I, II and IV only
B. I and II only
C. All of the above
D. II, III and IV only
Solutions:
| Question 1 Answer: D | Question 2 Answer: C | Question 3 Answer: B | Question 4 Answer: B | Question 5 Answer: B |
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