Risk management involves determining what risks a firm’s financial activities generate and avoiding unprofitable risk positions – True or False?

Practice question from NISM Series VII Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

True

Correct answer
B

False

Why this is the answer

Risk management is the process of identifying, assessing, and controlling risks arising from a firm’s financial activities. It aims to minimize potential losses by avoiding or mitigating unprofitable or high-risk positions, ensuring that the firm’s overall exposure remains within acceptable limits. Proper risk management protects the firm’s capital and supports sustainable financial performance.

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NISM Series VII Mock Test 5