CAMS · Question #915
CAMS Question #915: Real Exam Question with Answer & Explanation
The correct answer is A. The residual risk would be significantly reduced due to the effectiveness of the controls in place. In anEnterprise-Wide Risk Assessment (EWRA),residual riskis the level of risk that remains after applying mitigating controls to theinherent risk(the risk present before controls are applied). In this scenario, theinherent risk is highdue to the nature of private banking--high ne
Question
Options
- AThe residual risk would be significantly reduced due to the effectiveness of the controls in place
- BThe residual risk would be moderately reduced, but further controls may be necessary to achieve
- CThe residual risk would remain high due to the inherent nature of the private banking business
- DThe residual risk would be eliminated entirely because the controls are sufficient to mitigate all
Explanation
In anEnterprise-Wide Risk Assessment (EWRA),residual riskis the level of risk that remains after applying mitigating controls to theinherent risk(the risk present before controls are applied). In this scenario, theinherent risk is highdue to the nature of private banking--high net worth clients,cross-border transactions,complex ownership structures, andhigh-value financial products. However, the institution has implementedrobust CDD and EDD, as well asadvanced transaction monitoring systems. When effective and properly implemented controlsare in place, they cansignificantly reducethe residual risk--even in high-risk business areas like private banking. However, no control framework caneliminate all riskentirely. Option A is correct: Controls can significantly reduce the residual risk when strong, effective systems and procedures are in place.
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