Free GARP FRM Part II Operational Risk and Resilience Practice Questions

Practice 89 free Operational Risk and Resilience questions for GARP FRM Part II.

89 Questions

35 Easy

36 Medium

18 Hard

2026 Syllabus

Sample Questions

Question 1 Easy

Under the BCBS Principles for Operational Resilience (March 2021), 'impact tolerance' is best described as:

Solution

D is correct. BCBS defines impact tolerance as the maximum level of disruption to a critical operation that the firm is willing to accept, articulated in measurable, forward-looking terms (such as time offline, volume of transactions affected, or scope of customers harmed). It is a resilience metric used to drive scenario testing and remediation, not a capital or statistical loss measure.

Question 2 Medium

Bank Alpha reports a Business Indicator (BI) of €8 billion. Compute the Business Indicator Component (BIC) under the Basel III Standardised Approach for operational risk.

Solution

B is correct. BI of €8bn falls inside Buckets 1 and 2. Apply the marginal coefficients to each slice: Bucket 1 contribution = €1bn × 12% = €0.12bn. Bucket 2 contribution = (€8bn − €1bn) × 15% = €7bn × 15% = €1.05bn. BIC = €0.12bn + €1.05bn = €1.17bn.

Question 3 Hard

A bank models its annual aggregate operational loss

S

using a compound Poisson framework. The number of loss events per year is Poisson with rate

\lambda = 12

. Severity

X

is independent of frequency, with mean $100,000 and standard deviation $200,000. What is the standard deviation of the annual aggregate loss

S

Solution

B is correct. For a compound Poisson,

\mathrm{Var}(S) = \lambda \cdot E[X^2]

, where

E[X^2] = \mathrm{Var}(X) + (E[X])^2

. Compute

E[X^2] = (200{,}000)^2 + (100{,}000)^2 = 4 \times 10^{10} + 1 \times 10^{10} = 5 \times 10^{10}

. Then

\mathrm{Var}(S) = 12 \times 5 \times 10^{10} = 6 \times 10^{11}

, so

\mathrm{SD}(S) = \sqrt{6 \times 10^{11}} \approx 774{,}600

, which rounds to about $775,000.

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