n NISM Certifications
XXI NISM Series XXI-A
Medium

How can operational risk in portfolio companies be managed?

Practice question from NISM XXI A for PMS - Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    By selecting Beta stocks for investments.

  2. By diversifying investments across companies and industries.

    Correct answer

  3. C

    By buying a reinsurance policy.

  4. D

    By using derivatives to hedge the portfolio.

Why this is the answer

Operational risk arises from internal factors like errors, fraud, or system failures. Diversification across companies and industries reduces the impact if one suffers operational issues.

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