OPERATIONAL RISKMANAGER CERTIFICATE

CANDIDATE GUIDEBOOK

The Industry Standard for Operational Risk Practitioners

CONTENTS1 EXECUTIVE SUMMARY

2 PROGRAM DESIGN

2 PROGRAM DATES AND LOCATIONS

3 FEES AND REGISTRATION

3 TAKING THE OPERATIONAL RISK MANAGER EXAM

5 OPERATIONAL RISK MANAGER SYLLABUS

6 PREPARING FOR THE OPERATIONALRISK MANAGER EXAM

EXECUTIVE SUMMARY

PRMIA’s Operational Risk Manager Certificate is designedto deliver a deep, practical understanding of operationalrisk management frameworks and measurementmethodologies in financial institutions. Successfulcandidates will be better prepared to implementmeaningful risk assessment initiatives, produce useful riskmanagement information and understand basic modelingtechniques for operational risk measurement.

The Operational Risk exam consists of 60 questions. Thesyllabus is based on the PRMIA Operational Risk ManagerCertificate Handbook, together with PRMIA Case Studieswhich are freely available on the PRMIA website.

Registration for the exam is via the PRMIA website andtaking the exam is designed to suit the needs of the busy risk professional. Be sure to read thisentire document to view important information that will help you to be a successful candidate.

We hope that you will join us in promoting the PRM™ program as the standard for our industryand that you will join in our efforts to ensure that it will continue to meet the needs of ourmembers and our industry.

READING MATERIAL

� PRMIA Operational Risk ManagerCertificate Handbook

� PRMIA Case Studies

PROGRAM DATES AND LOCATIONSFor your convenience, the exam is offered on every business day of the week.*

� You may request to schedule your exams at any time. There is no advantage to taking your examson any particular date. Questions within exams are drawn from a large database of questions andare administered randomly, creating thousands of unique exam forms, all of comparable difficulty.

� PRMIA uses the services of VUE, part of the Pearson Publishing family, to administer the ORMexams. Pearson VUE is a professional testing firm that has nearly 5,000 testing centers in morethan 165 countries around the world.

� Please note some important details about registration, cancellation, identification requirementsand space availability in the Registration section found on page 3 and 4.

*Registration and testing for the ORM exam will begin in early 2015.

KEY LEARNING OBJECTIVES

The key learning objectives of the Operational RiskManager Certificate are to:

� Gain an appreciation for the role of risk manage-ment in the post crisis financial services industry

� Gain an appreciation for the role of corporate gover-nance in an organization and of the participants,elements and relationships within risk managementgovernance

� Gain an understanding of the different roles in riskgovernance and the place of reporting and the useof various elements of a risk framework

� Gain an understanding of the theory and process ofrisk management and the expected results from asuccessful risk management process

� List and discuss a set of developments in the gover-nance of risk management, with an introduction tothe area of risk culture

� Describe the elements of a risk management frame-work and choose the elements to implement in theirown workplace

� Manage an operational risk assessment programand apply it in their workplace

� Understand how to capture, report and investigateoperational risk events, how to produce meaningfulRisk MI including Key Risk Indicator (KRI) data andtrend analysis, and how to implement operationalrisk appetite

� Be able to recognize how operational risk manage-ment can assist the overall business and add value

DESIGN RATIONALE

The Operational Risk Manager Certificate programwas created at the instigation of PRMIA membersholding senior positions in the industry who feltthere was a gap in the market. It has been designedby industry leaders, all PRMIA members.

The Operational Risk Manager Certificate is relevantto all risk-related roles in financial services, in partic-ular Operational Risk Staff, Financial Controllers,Operations and Technology Managers, andCompliance and Legal Officers. A grounding in oper-ational risk management techniques is also becom-ing increasingly important for front line staff, bothfrom a process and conduct perspective in theirdealings with clients and market counterparts.

PROGRAM DESIGN

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FEES

Fees, relevant to your membership status, are given athttp://www.prmia.org/orm-certificate/preparation

� Payment by credit card is required for online purchases. If you would like to make alternativearrangements, please contactcertification@prmia.org.

� PRMIA Sustaining Members are given a 10% discount on the exam fee. You can become a Sustaining Member online atwww.prmia.org/individual-membership

� If you are interested in adopting theOperational Risk Manager Certificate as a corporate program, please contactmembership@prmia.org. Special pricing onexam vouchers and preparatory materialsmay be available to your company.

EXAM FORMAT

The exams are computer-based. You will not receive any copies ofthe questions. No paper may be brought into the testing center; how-ever, you will be provided with an erasable board upon request.

Once admitted to the testing room, there will be a tutorial that intro-duces the functionality of the exam and a brief message from PRMIA.After this has been viewed, you may begin your exam. You will beasked multiple-choice questions with four possible responses. Thereare no breaks allowed during the exam. The testing system allowsyou to mark and review questions as long as time is remaining.

Please note that you are unlikely to finishyour exams with substantial extra time. You are encouraged to use the tutorial in an expedient manner, but sufficient time isallocated for you to complete the tutorialand the exam.

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REGISTRATION

Registration for the Operational Risk Managerexam will begin in early 2015. Registration will be via the link found at http://www.prmia.org/orm-certificate/preparation.

When you register, a voucher number will be provided to you that you can use to schedule yourexam at the center, date and time of your choice.

FEES AND REGISTRATION

90 DAY RULE

Please note that there is a strict PRMIA policy that exams may NOTbe retaken within 90 days of a prior sitting. Any candidate attemptto transgress this policy by whatever means may result in penaltiesagainst the candidate which could include forfeit of any PRMIA cer-tifications, vouchers, and possible expulsion from PRMIA.

TAKING THE OPERATIONAL RISK MANAGER EXAM

PERSONAL IDENTIFICATION

On the date of your appointment,arrive at the testing center at least15 minutes before the scheduledstart time. You must bring twoforms of identification with you.The first must be a current gov-ernment-issued ID with your photograph and signature.

Examples of Acceptable Forms of Government Issued ID� Driver’s License � National Identity Card� Passport � Military ID

Examples of Acceptable Forms of Supplemental ID� Credit Card � Employee ID Card

Examples of Unacceptable Forms of ID� Library Card � Social Security Card

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EXAMINATION ADMINISTRATION

Each testing center has an administrator who can assist candidateswith any questions that they may have. In the event of any incident(computer failure, inadequate supplies, excessive noise, or any othercircumstance) which the candidate believes is not compatible withgood examination conditions, this must be brought to the attention ofthe examination proctor immediately upon the incident being noticed— without continuing the exam. Failure to inform the proctor in thismanner will invalidate any subsequent candidate incident reportingwhich cannot be substantiated by the test center.

Your exam results should be available within 15 business days of yourtest date and will be delivered to you via the PRMIA website whichyou can access by signing in to your PRMIA member page, go to“Membership” then “PRM Society” and finally “My PRM Profile”.

ARRIVE ON TIME

It is very important that you leave enough timeto arrive at the testing center early.

Candidates that arrive late to the test centermay not be permitted to test. The full chargefor the exam will be made if you are not admitted for any reason. As these centers offer exams for other organizations as well, not everyone in the room will be taking thesame exam, so no assumptions should bemade about when other candidates enter or leave the testing center.

EXAM SECURITY

The Operational Risk Managerexam is conducted undersecure conditions. Any attemptby candidates to copy ques-tions, by any means includingunorganized memorizing, andto distribute these questions toother individuals, will be treat-ed as unethical behavior andmay result in penalties againstthe candidate which couldinclude forfeit of any PRMIAcertifications, vouchers, andpossible expulsion fromPRMIA. Indictment to copy,and usage of copied questionsmay also result in the samepenalties.

CANCELLATIONS/CHANGES

In recognition of the busy and changingschedules of risk managers, you may changeyour exam appointment without chargethrough the Pearson Vue system atwww.pearsonvue.com/prmia. Please note thatall change requests must be made at leastone business day before the testing date orthe entire exam fee will be forfeited.

Because of the flexibility in rescheduling,exam fees are non-refundable.

CALCULATORSAn online scientific calculator, TexasInstrument TI308XS, is part of the testdelivery system. No other materials may bebrought into the exam room with you. It issuggested that candidates purchase thehand-held version (TI-30XS) to fully famil-iarize themselves with the calculator.

C. The Risk Management Framework

Participants will be able to describe theelements of a risk management frame-work and choose the elements toimplement in their own workplace.

1. Risk Capacity

a. Risk Capacity

b. Resources and Risk Capacity

c. Stress Testing and Simulation

d. Setting the Risk Capacity

2. Risk Appetite

a. Risk Appetite

b. The Risk Appetite in an Organization

c. An Example Risk Appetite Statement

3. Risk Policies

a. Introduction to Policies

b. Structure of a Risk Policy

c. Risk Policies in an Organization

d. Policy Coverage

4. Risk Pricing

a. Risk Pricing Introduction

b. Interaction with Internal and External Partners

c. Capital Costs

5. Risk Culture

a. Risk Culture

b. Leadership and Risk Culture

c. The Role of the Risk Management Function in Risk Culture

d. The Place of Other Staff in Risk Culture

e. Evaluating Risk Culture

OPERATIONAL RISK MANAGER SYLLABUS

SYLLABUS SUMMARY

Section

A Introduction 2 3%

B Risk Governance 6 10%

C Risk Management Framework 12 20%

D Risk Assessment 12 20%

E Risk Information 12 20%

F Risk Modeling 8 14%

G Insurance Mitigation 2 3%

H Case Studies 6 10%

Total 60 100%5

Number of Questionsin the Exam

Percentageof the Exam

A. Introduction

Participants will gain an appreciation of the role of riskmanagement in the post crisis financial services industry.

1. Regulatory Context since 2008

2. Embedding Risk Best Practices

B. Risk Governance

Participants will gain an appreciation of the roleof risk management in the post crisis financialservices industry.

1. Governance

a. Origins of Corporate Governance

b. Risk Governance and Strategic Planning

c. Risk Governance Principles

2. People / Roles and Responsibilities

a. The Board

b. CRO

c. Wider Reporting

d. Systems and Documentation

3. Process

a. Theory

b. Risk Management Process

c. Results

4. Risk Governance Developments

D. Risk Assessment

Participants will be able to manage anoperational risk assessment programand apply it in their workplace.

1. Risk Assessment

a. Risk Assessment Overview

b. Risk Assessment Lifecycle

2. Risk Scenarios (‘Top Down’)

a. Top Down Identification

b. Workshops

c. Example Scenario (DR)

3. Process Models (‘Bottom Up’)

a. Control Identification (Linking Top-Down and Bottom-Up)

b. Process Reviews

c. Control Framework and Assessment

4. Operational Risk Issues

a. Identify Issues and Design Actions Plan

b. Issue Management

c. Residual Risk

d. Management Validation

5. Additional Risk Assessment Topics

a. Risk Assessment of New and Expanded Products

b. Risk Assessment and Third Party Services

E. Risk Information

Participants will be able to describeoperational risk events, Key RiskIndicators (KRIs) and Reporting and create a KRI framework.

1. Introduction

a. Risk Appetite and Risk Profile

b. Expected Loss

c. Unexpected Loss

2. Loss Investigations

a. Operational Risk Incidents & Investigation

b. Collecting Loss Data

c. Quantifying Losses

d. Boundary Issues

e. External Loss Data

3. Key Risk Indicators (KRIs)

a. Introduction to KRIs

b. Selecting Appropriate KRIs

c. Interdependent KRIs

e. Implementing a KRI Framework

4. Risk Reporting & Toolsets

a. Data Model

b. Workflows

c. Reporting

PREPARING FOR THE OPERATIONAL RISK MANAGER EXAM

PRMIA Operational Risk Manager Certificate Handbook

PRMIA Case StudiesAvailable at no charge on the PRMIA website

Operational Risk Manager Course Powered by NextThoughtThe Operational Risk Manager Training Course helps you prepare for the exam. The online course brings online risk educationin the web 2.0: to be social, interactive and engaging, by making use of the latest technology available. PRMIA has partneredwith NextThought to reinvent the way you learn online: connected, efficient and mobile. The course combines video recordings,text, slide and multiple choice integration to offer the optimal study environment.

G. Insurance Mitigation

a. Insurance Mitigation Introduction

b. Risk Taxonomy and Mapping

c. Qualification Criteria of Insurance Mitigation

d. Calculation of Capital Relief

F. Risk Modeling

Participants will be able to recognize how operational riskmanagement can assist the overall business and add value.

1. Capital & Risk Pricing

a. Basel II and Operational Risk Capital

b. Frequency and Severity

c. Combining Approaches

d. Capital Allocation

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