How it works
Problem 1Where did the cycle break?
L2.4.01 · L2.4.06 · L2.4.07A new chief risk officer
You join Coralpoint Insurance, a made-up Australian motor and home insurer. Last year its claims team found the risk of organised fraud in motor claims, scored it high, and added a fraud screening check. It set up a KRI: claims referred to the fraud team as a share of all claims. The KRI was red for four months in a row. The analyst who wrote the monthly note to the claims risk committee had left, and nobody else sent it. Fraud losses doubled.
Which step of the risk management cycle failed?
Problem 2Score a storm backlog
L2.4.03A claims operations manager
Coralpoint uses these scales. A severe storm season could leave thousands of home claims waiting for months, leading to complaints, regulatory action and extra costs. Your team estimates a 12% chance in the next year, and a loss of A$18m if it happens.
| Band | Likelihood (chance in a year) | Impact (loss if it happens) |
|---|---|---|
| 1 | under 5% | under A$0.5m |
| 2 | 5% to 20% | A$0.5m to A$2m |
| 3 | 20% to 50% | A$2m to A$10m |
| 4 | 50% to 80% | A$10m to A$50m |
| 5 | over 80% | over A$50m |
What is the risk's score (likelihood band × impact band)?
Problem 3Same score, same risk?
L2.4.03A risk analyst preparing the heat map
Two claims risks both score 8. Risk A, payment errors on settled claims: a 60% chance a year of A$1.5m. Risk B, a reinsurance recovery dispute: a 10% chance of A$30m.
How many times larger is B's expected loss than A's? Give two decimals.
Problem 4The tail behind a medium
L2.4.03Coralpoint's chief information security officer
| Cyber outcome in a year | Chance | Loss |
|---|---|---|
| Minor incident | 30% | A$0.2m |
| Serious breach | 4% | A$6m |
| Severe attack | 1% | A$80m |
What is the expected cyber loss for the year, in A$ millions?
Problem 5Review a register row
L2.4.04 · L2.4.05An operational risk partner (second line)
| Field | Entry |
|---|---|
| Risk | Because claims handlers can approve payments up to A$50,000 alone, a handler could pay a false claim, leading to fraud losses. |
| Owner | Claims committee |
| Key control | Planned: AI screening of every claim |
| Inherent → residual | High → Low |
| Action | Introduce AI screening. Head of Claims, by 31 March 2027 |
Which of these is NOT a flaw in the row?
Problem 6Challenge the self-assessment
L2.4.05 · L2.4.03An operational risk partner running the claims RCSA
The claims team rates claims fraud before controls at a 40% chance a year of A$12m (band 3 × band 4 = 12, high). It credits two controls: fraud screening at intake, which removes 60% of the chance, and recovery of paid fraud through the courts, which removes 25% of the loss. That gives a residual expected loss of A$1.44m.
Your control testers found that no recovery action was started in the last 12 months: the recovery control has not operated.
What residual expected loss should the RCSA record, in A$ millions?
Problem 7When does the KRI warn?
L2.4.06The head of claims quality
Coralpoint watches claims reopened after closing, as a share of claims closed. Amber is 5%, red is 6.5%.
| Month | Claims closed | Reopened |
|---|---|---|
| 1 | 1,200 | 42 |
| 2 | 1,150 | 46 |
| 3 | 1,300 | 57 |
| 4 | 1,250 | 66 |
| 5 | 1,180 | 71 |
| 6 | 1,220 | 85 |
In which month (1 to 6) does the KRI first reach amber?
Problem 8Between board meetings
L2.4.07Coralpoint's chief risk officer
Last week, operational losses for the year passed the limit the board set in its risk appetite. The next board meeting is in seven weeks. The finance director suggests waiting and covering it in the quarterly report.
What should you do?
Your score
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