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PRMIA Operational Risk Manager (ORM) Exam 8010 Exam

Attempt the Operational Risk Management practice test and solve real exam-like 8010 questions to prepare efficiently and increase your chances of success. Our PRMIA 8010 practice questions match the actual Operational Risk Manager (ORM) Exam format, helping you enhance confidence and improve performance. With our 8010 practice exam software, you can analyze your performance, identify weak areas, and work on them effectively to boost your final Operational Risk Management exam score.

Vendor:	PRMIA
Exam Name:	Operational Risk Manager (ORM) Exam
Registration Code:	8010
Related Certification:	PRMIA ORM Certification
Exam Audience:

Total Questions

241

Last Updated

13-08-2026

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Question: 1

For a loan portfolio, expected losses are charged against:

AEconomic capital

BRegulatory capital

CCredit reserves

DEconomic credit capital

Answer: C

Explanation:

Credit reserves are created in respect of expected losses, which are considered the cost of doing business. Unexpected losses are borne by economic credit capital, which is a part of economic capital. Therefore Choice 'c' is the correct answer.

Question: 2

Which loss event type is the failure to timely deliver collateral classified as under the Basel II framework?

AClients, products and business practices

BExternal fraud

CInformation security

DExecution, Delivery & Process Management

Answer: D

Explanation:

Refer to the detailed loss event type classification under Basel II (see Annex 9 of the accord). You should know the exact names of all loss event types, and examples of each.

Question: 3

For a bank using the advanced measurement approach to measuring operational risk, which of the following brings the greatest 'model risk' to its estimates:

AChoice of an incorrect distribution for loss event frequencies

BInsufficient number of simulations when building the loss distribution

CChoice of incorrect parameters for loss severity distributions

DAggregation risk, from selecting an incorrect value of estimated correlations between different operational risk estimates

Answer: D

Explanation:

The greatest model risk when calculating operational risk capital comes from incorrect assumptions about correlations between different operational risks for which standalone risk calculations have been made. Generally, the correlation can be expected to be positive, and would therefore vary between 0 and 1. These two values determine the 'bounds' between which the total operational risk capital would lie, and these bounds are generally quite far apart. Therefore the total value of the operational risk capital is very sensitive to the value chosen for the correlation, and this is the source of the biggest model risk under the AMA.

Question: 4

For a corporate bond, which of the following statements is true:

1. The credit spread is equal to the default rate times the recovery rate

2. The spread widens when the ratings of the corporate experience an upgrade

3. Both recovery rates and probabilities of default are related to the business cycle and move in opposite directions to each other

4. Corporate bond spreads are affected by both the risk of default and the liquidity of the particular issue

A1,2 and 4

B3 and 4

C3 only

D4 only

Answer: B

Explanation:

The credit spread is equal to the default rate times the loss given default, or stated another way, default rate times (1 - recovery rate). It is not equal to the default rate times the recovery rate. Therefore statement I is not correct.

When ratings are upgraded by rating agencies, the spread contracts and not widen. Therefore statement II is not correct.

Both recovery rates and probabilities of default are related to the business cycle, and they move in opposite directions. Economic recessions witness an increase in the default rate and a decrease in the recovery rate, and economic expansions result in a decrease in the default rate and an increase in the recovery rates when default does happen. Therefore statement III is correct.

Bond spreads incorporate both the risk of default, but also considerations of liquidity in the case of corporate bonds. Hence statement IV is correct.

Question: 5

When combining separate bottom up estimates of market, credit and operational risk measures, a most conservative economic capital estimate results from which of the following assumptions:

AAssuming that the resulting distributions have a correlation between 0 and 1

BAssuming that market, credit and operational risk estimates are perfectly positively correlated

CAssuming that market, credit and operational risk estimates are perfectly negatively correlated

DAssuming that market, credit and operational risk estimates are uncorrelated

Answer: B

Explanation:

Explanation

If the risks are considered perfectly positively correlated, ie assumed to have a correlation equal to 1, the standard deviations can simply be added together. This gives the most conservative estimate of combined risk for capital calculation purposes. In practice, this is the assumption used most often.

If risks are uncorrelated, ie correlation is assumed to be zero, variances can be added or the standard deviation is the root of the sum of the squares of the individual standard deviations. This obviously gives a number lower than that given when correlation is assumed to be +1.

Similarly, assumptions of negative correlation, or any correlation other than +1 will give a standard deviation number that is smaller and therefore less conservative. Choice 'b' is the correct answer.

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