Which of the following statements are true?
I. Retail Risk Based Pricing involves using borrower specific data to arrive at both credit adjudication and pricing decisions
II. An integrated 'Risk Information Management Environment' includes two elements - people and processes
III. A Logical Data Model (LDM) lays down the relationships between data elements that an organization stores
IV. Reference Data and Metadata refer to the same thing
Select an option, then click Submit answer.
Reference / correct answer:
Statement I is correct. Retail Risk Based Pricing (RRBP) involves the use of borrower specific data (such as FICO scores, average balances etc) to arrive at credit decisions. These 'retail' credit decisions may include decisions on whether to grant a line of credit, a mortgage, issue a credit card, or any of the various other retail activities a bank may be dealing with. At the same time, this data can also be used to price the product, in addition to providing a yes or no credit decision so that risky borrowers are charged more than less risky borrowers.
Statement II is not correct, because an integrated Risk Information Management Environment includes three elements - people, processes and technology (and not just people and processes).
Statement III is correct. An LDM is a blue print of an organization's data, and describes the relationships between the various data elements.
Statement IV is not correct because reference data and metadata are not the same thing. Reference data refers to relatively static data, such as customer name (while actual transactions may not be so static). Metadata refers to data about data, and is stored in a data dictionary.
Therefore Choice 'b' is the correct answer and the rest are incorrect.
