Examination Paper: Risk Management
IIBM Institute of Business Management 1
IIBM Institute of Business Management
Examination Paper MM.100
Risk Management
Section A: Objective Type (30 Marks)
•This section consists of Multiple Choice questions & short notes type questions.
•Answer all the questions.
•Part one questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
Multiple Choices:
1. It represents the owner’s stake in the bank & it serves as a cushion for depositors & creditors to
fall back in case of losses.
a. Capital
b. Reserve & Surplus
c. Deposits
d. Borrowings
2. This involves evaluating whether a bank has sufficient liquidity depends in large measure on
the behavior of cash flows under the different conditions.
a. The maturity ladder
b. Alternative Scenarios
c. Measuring liquidity over the chosen time frame
d. Assumptions used in determining cash flows
3. This is the risk of adverse deviations of the mark-to-market value of the trading portfolio, due
to market movements; during the period required to liquidate the transactions.
a. Market Risk
b. Liquidation Risk
c. Market liquidity Risk
d. Credit & counterparty Risk
4.__________ is buying or selling an asset only for the purpose of making profit from movement
of the asset price over a period of time.
a. Arbitrage
b. Derivatives
c. D-mat account
d. Speculation
5. A combination of spot & forward transactions is called a ___________
a. Advances
b. Foreign bills
c. Swap
d. Loans
Examination Paper: Risk Management
IIBM Institute of Business Management 2
6.__________ Money refers to placement of funds beyond overnight for periods not exceeding 14
days.
a. Call money
b. Notice money
c. Term money
d. None
7. A short-term debt market paper issued by corporate, with a maximum maturity of 1 year.
a. Treasury Bills
b. Certificates of deposit
c. Repo
d. Commercial paper
8. It refers to the ability of a business concern to borrow or build up assets, on the basis of a given
capital.
a. Leverages
b. Confirmation
c. DVP
d. Volatility
9.__________ Limits are kept in place to protect the bank from credit risk.
a. Exposure ceiling
b. Stop-loss
c. Organizational controls
d. Limits on trading positions
10. RAROC stands for _____________________.
Part Two:
1. Differentiate between options & Forward contract.
2. Write down the steps which are taken by RBI to encourage the derivative market.
3. What is Basic indicator Approach (BIA)?
4. Write a short note on profitability in Indian Banks.
END OF SECTION A
Examination Paper: Risk Management
IIBM Institute of Business Management 3
Section B: Caselets (40 Marks)
•This section consists of Caselets.
•Answer all the questions.
•Each caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
Everybody Bank was set up with a registered office at Gwalior in 1995-96 by a leading financial
organization, when the government liberalized its policies and allowed private sector banks to
operate. The branch at Gwalior was established on November 13, 1995. Everybody bank was the
first private sector bank to commerce its operations at Gwalior. The bank had the advantage of
being the first and got good business. Subsequently, other private sector banks also opened their
branches in Gwalior. Dinesh joined the branch as branch head in june-1998. His focus was to
retain the
Questions:
1. Critically analyze the strategies adopted by Dinesh to retain the leading position.
2. What additional steps Dinesh could have taken to improve the profitability?
Caselet 2
Established in 1950 Ramakrishna Motors Ltd.is one of the India’s pioneers in vehicle
Manufacturing with a total investment of Rs.500 crore and currently has a gross capital Employed
of Rs 906 crores (Annexure I).Over the years, Ramakrishna Motors Ltd, has Established a
Questions:
1. Evaluate the company’s investment decision with specific reference to the Agra plant.
2. Had you been the finance manager, would you accept Ford Motors proposal? Why?
Examination Paper: Risk Management
IIBM Institute of Business Management 6
3. Do you think the finance manager needs to be concerned about the low depreciation
provision? Why?
4. What according to you is the source of finance available to Ramakrishna Motors Ltd in
case it is required to finance the Ford proposal for the Agra plant?
Section C: Applied Theory (30 Marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should from the part of your Answer (Word limit 200 to 250 words)
1. “When a steel company goes bankrupt, other companies in the same industry benefit
because they have one less competitor. But when a bank goes bankrupt, other banks do
not necessarily benefit.” Explain this statement.
2. “The existence of deposit insurance makes it particularly important for there to be
regulations on the amount of capital banks hold.” Explain this statement.
END OF SECTION B
END OF SECTION C
IIBM Institute of Business Management 1
IIBM Institute of Business Management
Examination Paper MM.100
Risk Management
Section A: Objective Type (30 Marks)
•This section consists of Multiple Choice questions & short notes type questions.
•Answer all the questions.
•Part one questions carry 1 mark each & Part Two questions carry 5 marks each.
Part One:
Multiple Choices:
1. It represents the owner’s stake in the bank & it serves as a cushion for depositors & creditors to
fall back in case of losses.
a. Capital
b. Reserve & Surplus
c. Deposits
d. Borrowings
2. This involves evaluating whether a bank has sufficient liquidity depends in large measure on
the behavior of cash flows under the different conditions.
a. The maturity ladder
b. Alternative Scenarios
c. Measuring liquidity over the chosen time frame
d. Assumptions used in determining cash flows
3. This is the risk of adverse deviations of the mark-to-market value of the trading portfolio, due
to market movements; during the period required to liquidate the transactions.
a. Market Risk
b. Liquidation Risk
c. Market liquidity Risk
d. Credit & counterparty Risk
4.__________ is buying or selling an asset only for the purpose of making profit from movement
of the asset price over a period of time.
a. Arbitrage
b. Derivatives
c. D-mat account
d. Speculation
5. A combination of spot & forward transactions is called a ___________
a. Advances
b. Foreign bills
c. Swap
d. Loans
Examination Paper: Risk Management
IIBM Institute of Business Management 2
6.__________ Money refers to placement of funds beyond overnight for periods not exceeding 14
days.
a. Call money
b. Notice money
c. Term money
d. None
7. A short-term debt market paper issued by corporate, with a maximum maturity of 1 year.
a. Treasury Bills
b. Certificates of deposit
c. Repo
d. Commercial paper
8. It refers to the ability of a business concern to borrow or build up assets, on the basis of a given
capital.
a. Leverages
b. Confirmation
c. DVP
d. Volatility
9.__________ Limits are kept in place to protect the bank from credit risk.
a. Exposure ceiling
b. Stop-loss
c. Organizational controls
d. Limits on trading positions
10. RAROC stands for _____________________.
Part Two:
1. Differentiate between options & Forward contract.
2. Write down the steps which are taken by RBI to encourage the derivative market.
3. What is Basic indicator Approach (BIA)?
4. Write a short note on profitability in Indian Banks.
END OF SECTION A
Examination Paper: Risk Management
IIBM Institute of Business Management 3
Section B: Caselets (40 Marks)
•This section consists of Caselets.
•Answer all the questions.
•Each caselet carries 20 marks.
•Detailed information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
Everybody Bank was set up with a registered office at Gwalior in 1995-96 by a leading financial
organization, when the government liberalized its policies and allowed private sector banks to
operate. The branch at Gwalior was established on November 13, 1995. Everybody bank was the
first private sector bank to commerce its operations at Gwalior. The bank had the advantage of
being the first and got good business. Subsequently, other private sector banks also opened their
branches in Gwalior. Dinesh joined the branch as branch head in june-1998. His focus was to
retain the
Questions:
1. Critically analyze the strategies adopted by Dinesh to retain the leading position.
2. What additional steps Dinesh could have taken to improve the profitability?
Caselet 2
Established in 1950 Ramakrishna Motors Ltd.is one of the India’s pioneers in vehicle
Manufacturing with a total investment of Rs.500 crore and currently has a gross capital Employed
of Rs 906 crores (Annexure I).Over the years, Ramakrishna Motors Ltd, has Established a
Questions:
1. Evaluate the company’s investment decision with specific reference to the Agra plant.
2. Had you been the finance manager, would you accept Ford Motors proposal? Why?
Examination Paper: Risk Management
IIBM Institute of Business Management 6
3. Do you think the finance manager needs to be concerned about the low depreciation
provision? Why?
4. What according to you is the source of finance available to Ramakrishna Motors Ltd in
case it is required to finance the Ford proposal for the Agra plant?
Section C: Applied Theory (30 Marks)
•This section consists of Applied Theory Questions.
•Answer all the questions.
•Each question carries 15 marks.
•Detailed information should from the part of your Answer (Word limit 200 to 250 words)
1. “When a steel company goes bankrupt, other companies in the same industry benefit
because they have one less competitor. But when a bank goes bankrupt, other banks do
not necessarily benefit.” Explain this statement.
2. “The existence of deposit insurance makes it particularly important for there to be
regulations on the amount of capital banks hold.” Explain this statement.
END OF SECTION B
END OF SECTION C
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