Risk in Financial Services — Information & Free Practice

About Risk in Financial Services

Risk in Financial Services · GB

Key exam facts

Provider

Chartered Institute for Securities & Investment (CISI), examination owner and learning-material publisher.

Format

Multiple-choice knowledge exam, available by remote invigilation or at computer-based test centres.

Exam questions

Total questions: 100–110; Scored questions: 100; Unscored questions: 0–10; The total includes the scored and unscored questions.

Time limit

2 hours for 100 core questions; proportionately more time is allowed for additional CBT trial questions.

Passing score

70%: the Version 12 official sample paper classifies scores 70–100 as Pass and 0–69 as Fail.

Exam fee

UK prices, 1 April 2026–31 March 2027: exam GBP 283; mandatory workbook GBP 105 separately; saver package GBP 403 (exam, workbook and Revision Express); one-off GBP 68 qualification registration fee when registering the first qualification. Concessionary rates are available for unemployed individuals.

Topics covered

• Principles of Risk Management (13%)

  • Introduction to Risk in Business
  • Specific Risks in Financial Services
  • Emerging considerations for the Financial Services industry
  • understand the processes typically used to identify, reduce and manage specific aspects of risk
  • understand the key elements of risk management and the differences between risk and uncertainty
  • know the key external sources of risk and their potential impact on a business: • economic • political • competitive environment, social and market forces • technological including cyber security • geopolitical and natural events • external stakeholders and third parties • Environmental, Social, and Governance (ESG) risks
  • understand how the key external sources of risk are typically assessed
  • know the key internal drivers of risk: • strategic • operational • financial
  • understand how the key internal drivers of risk are typically assessed
  • understand the overlapping and interactive nature of external and internal risk drivers
  • understand the following risk concepts: • risk culture and conduct risk • risk appetite • inherent (gross) risk • residual (net) risk • risk profile • risk mitigation • reputational risk
  • understand how risk management protects and adds value to an organisation and its stakeholders
  • know the specific key risks in financial services as defined by the Bank for International Settlements
  • understand the relationships between risks in financial systems
  • understand the nature of systemic risk and recovery and resolution planning within financial services
  • know potential benefits and problems associated with disruptive innovation in: • Fintech • RegTech • Digital assets, Blockchain, Cryptocurrencies and Smart contracts

• International Risk Regulation (7%)

  • The Bank for International Settlements
  • Basel Regulatory Capital
  • Regulatory Risk
  • Other Relevant Regulations
  • understand the role of the Bank for International Settlements within the financial services industry
  • know the purposes for which the Basel Committee on Banking Supervision was established, and the drivers it introduced to calculate the capital adequacy of banks
  • understand the high-level international guidelines and supervisory standards established by the Basel Committee and differences in global implementation
  • know the purpose, key features and implementation implications of Basel: • Pillars 1 (Capital Adequacy), 2 (Supervisory Review) and 3 (Market Discipline) • Sound Practice Principles • Internal capital and liquidity adequacy assessment
  • understand the key principles of home-host state regulation
  • understand the main differences between statutory and principles- based approaches to financial regulation
  • understand the responsibility of the national regulator to implement supervision measures to address country-specific risks
  • understand the main features of the regulatory framework from the perspective of regulatory risk and implementation: • consumer protection • business standards • financial crime prevention • regulatory standards
  • understand the purpose and process of risk based regulatory reviews and risk assessment visits
  • understand the importance of considering other legislation within the processes of risk identification and management

• Operational Risk (18%)

  • Definitions of Operational Risk
  • Operational Risk Policy
  • Operational Risk Framework
  • Operational Risk Identification
  • Operational Risk Assessment and Measurement
  • Managing Operational Risk
  • know the definition of operational risk according to the Basel Committee on Banking Supervision
  • know the Basel operational risk event types and what forms they take: • Internal Fraud • External Fraud • Employment Practices and Workplace Safety • Clients, Products, & Business Practice • Damage to Physical Assets • Business Disruption & Systems Failures • Execution, Delivery & Process Management
  • know where and how the Basel operational risk event types typically arise
  • be able to distinguish operational risk from: • other forms of risk • further risks that arise as a consequence of operational risk
  • understand the following areas that are addressed by an operational risk policy and what they are designed to achieve: • identification of key officers • define clear roles and responsibilities • segregation of duties • cross functional involvement and agreement
  • understand the key aims of the operational risk management function: • identification and assessment of risks • management of risks • reduction of potential impact and likelihood of occurrence
  • know the stages of an operational risk management framework: • identification • measurement • management and control • management information • monitoring • escalation • remediation
  • understand the purpose of identifying and categorising risks
  • understand the self-assessment (self-certification) method of identifying operational risks
  • be able to apply risk categorisation to simple, practical examples of normal activity and change-related projects: • people • processes • systems • external events
  • understand the main reasons for assessing and measuring operational risk, and the difficulties involved
  • know the basic terms used in the assessment and measurement of operational risk
  • understand the following methods of assessing operational risk: • impact and likelihood assessment • scenario analysis • bottom-up analysis
  • understand the Key Risk Indicators (KRI) method of measuring operational risk
  • understand how historical loss data can be used in measuring operational risk
  • understand the practical constraints of implementing an operational risk management framework
  • know the purpose of a risk register (risk log) and its core features: • objectives • description of risk • risk ranking • lead person or department • action plan • target and completion dates • sources of assurance and oversight • mitigating controls
  • be able to distinguish between the following methods for reducing operational risk exposure: • risk transfer • risk avoidance • risk mitigation • risk acceptance
  • know the common methods for operational risk mitigation: • controls • financial crime compliance • operational resilience • outsourcing • insurance • information, cyber security • data protection and privacy • physical security • financial reserves • risk awareness training
  • understand how historical loss data can be used in managing operational risk

• Credit Risk (16%)

  • Identification of Credit Risk
  • Credit Risk Measurement
  • Credit Risk Management
  • understand the key components of credit risk and how they arise: • counterparty risk • issuer risk • concentration risk
  • know the main areas of exposure of counterparty, systematic and issuer risk within banking, securities and investment functions
  • understand credit risk boundary issues as identified within Basel
  • understand the following techniques for measuring credit risk and what they are designed to achieve: • credit exposure • credit risk premium • credit ratings
  • understand the role and influence of credit rating agencies
  • understand the merits and limitations of using credit ratings to assess creditworthiness of companies and financial instruments
  • understand the key issues relating to counterparty credit risk and applications in practice: • probability of default (PD) • loss given default (LGD) • exposure at default (EAD) • recovery rates (RR) • credit events • maturity • wrong way risk • non-performing assets
  • know the basic principles of setting credit limits for trade book and loan product risk management
  • understand the main limitations of credit risk measurement
  • understand the following examples of credit risk mitigation, and how they may be typically applied: • underwriting standards • guarantees • credit limits • netting • collateral • diversification • insurance / credit derivatives • credit default swaps • collateralised debt obligations • loan sales and securitisation • central counterparties
  • be able to calculate a simple margin or collateral adequacy calculation
  • understand the role and sound practice features of an effective credit risk management function
  • understand the role of reporting and escalation tools of credit risk management
  • know the Basel key stages of credit risk policy development, modelling and control: • development • validation • approval • implementation • review • post-implementation monitoring
  • understand the methods used to manage credit risk: • credit scoring systems • factor inputs: financial, non-financial and extraordinary • stress testing • segmentation • external ratings • setting limits or caps • internal credit rating • provisioning and impairment • key statistics and key performance indicators
  • understand the purpose and methods of controlling concentration risk: • single borrower or group of related borrowers • country, sector and industry risk
  • understand the purpose and principles of controlling trading book risk: • Value-at-Risk (VaR) • confidence levels

• Market Risk (12%)

  • Identification of Market Risk
  • Market Risk Management
  • know and be able to identify the different types of market risk: • volatility risk • market liquidity risk • currency risk • basis risk • interest rate risk • commodity risk • equity risk
  • understand the boundary issues that can arise between different types of market risk
  • be able to apply an understanding of market risk to simple, practical situations
  • understand the following techniques and their application in managing market risk: • hedging • market risk limits • diversification
  • understand the role and sound practice features of an effective market risk management function
  • know the key measures of central tendency and dispersion: • range and inter-quartile range • median • mean and quartile deviation • variance • standard deviation
  • understand the relevance and application of measures of central tendency and dispersion within risk analysis
  • understand the terms distribution analysis, confidence intervals, normal distribution and fat tailed distribution, and how they are used within risk analysis
  • know the following concepts used in risk measurement and control: • probability • volatility • regression • correlation coefficients alpha and beta • optimisation
  • understand the Value-at-Risk (VaR) approach to managing market risk: • VaR limit setting and monitoring for bank trading positions • VaR as a portfolio measure of risk • validation and back testing
  • know the three different approaches to VaR: • historical simulation • parametric • Monte Carlo
  • understand the underlying purposes, principles and application of the main types of scenario analysis and stress testing: • extreme event • risk factor • external factor

• Investment Risk (11%)

  • The Measurement of Investment Returns
  • Identification, Measurement and Management of Investment Risk
  • understand the basic concepts and measurement of investment related returns: • nominal returns • real returns • total returns • holding period return
  • understand the effects of compound interest and the time value of money
  • understand how the rates of return from the main asset classes vary
  • understand the main investment risks and their implications for investors and investment selection: • currency risk • interest rate risk • issuer risk • equity risk • commodity risk • property risk • fund liquidity risk
  • understand how asset and portfolio investment risk is calculated
  • understand the significance of alpha, beta and key investor ratios
  • understand the key features and relevance of illiquid assets in relation to investment risk: • venture capital • private equity • property
  • understand the concept of correlation of performance between asset classes
  • understand the concept of tracking error
  • know the key features of an investment mandate and its role in risk mitigation
  • understand the main methods used to mitigate investment portfolio risk: • systematic and non-systematic risk • optimisation and diversification • portfolio hedging • short selling • risk transfer
  • understand how timely and accurate monitoring, management and reporting of investments can enhance the risk management process

• Liquidity Risk (8%)

  • Identification of Liquidity Risk
  • Measurement of Liquidity Risk
  • Management of Liquidity Risk
  • Regulatory requirements
  • understand the basic constituents of liquidity risk and how they can arise within the contexts of credit, market, investment and operational risk: • maturity ladder • actual and contractual cash receipts • asset liquidity risk • funding liquidity risk
  • understand the potential impact of liquidity risk within an individual firm and across the wider financial system
  • understand the importance of funding liquidity risk analysis: • liquidity gap analysis • stress testing • expected future funding requirement
  • know the uses and limitations of the key measures of asset liquidity risk: • bid-offer spread • market depth • immediacy • resilience
  • understand the main ways in which liquidity risk can be managed: • liquidity limits • counterparty credit limits • scenario analysis • liquidity at risk • diversification • behavioural analysis • funding methods
  • be able to calculate a simple example of a cash netting agreement
  • understand the concept and implications of market dislocation
  • understand the key regulatory requirements in relation to liquidity risk

• Model Risk (4%)

  • Overview of Model Risk
  • know the benefits and limitations of modelling
  • know the major models utilised in operational, credit, market and liquidity risks
  • understand the principles of effective governance of risk modelling
  • understand the risks associated with models developed using AI

• Risk Oversight and Corporate Governance (5%)

  • Risk Governance within Financial Services Organisations
  • Risk Culture and Leadership
  • understand the general roles, responsibilities and relationships between the principal oversight functions and the role of senior management: • board of directors • risk committee • regulatory oversight
  • understand the principles of the three lines of defence
  • understand the key challenges of implementing risk governance structure, policies and procedures: • appropriate authority and autonomy • segregation of duties • relationship of risk managers to the business
  • know the main factors determining a firm’s risk and control culture: • ownership and involvement • governance and policies • risk appetite / risk tolerance • transparency • integrity, ethics and social responsibility • individual accountability (e.g. Senior Management and Certification Regime) • education and development
  • understand how appropriate management of these factors can add value and reduce risk

• Enterprise Risk Management (ERM) (6%)

  • Overview of Enterprise Risk Management (ERM)
  • know the definitions of enterprise risk and ERM
  • understand how enterprise risk relates to the process of corporate governance and board responsibilities
  • understand how industry regulation and sound practice have combined to influence the development and implementation of ERM programmes
  • understand the main goals and challenges of establishing and implementing an ERM programme in relation to: • exception-based escalation • aggregation • accountability • ESG risk • Governance, Risk and Compliance (GRC)
  • understand ESG in the context of ERM framework and strategic risk implication
  • know the most relevant business functions that participate in an ERM programme

How to prepare

Work through the topics, read the explanation after each answer, and revisit the areas where you miss questions. Use the official outline and reference materials below to guide your study.

These independent practice questions are not actual exam items and do not guarantee a passing result.

Frequently asked questions

Official sources and references

• CISI Risk in Financial Services Syllabus

  printed p. 2, Syllabus Structure

• CISI Risk in Financial Services Syllabus

  printed p. 3, Examination Specification

• CISI Risk in Financial Services Syllabus

  Cover, effective date

• CISI Risk in Financial Services Syllabus

  printed p. 4, Assessment Structure

• CISI Risk in Financial Services Sample Paper

  PDF p. 2, How to use this sample paper

• CISI Price List 2026–2027

  UK exam prices, Qualifying Level 3 units, Risk in Financial Services row

• CISI Risk in Financial Services Learning Manual

  Cover, first examination date

• CISI Risk in Financial Services Learning Manual

  Cover, last examination date

Confirm current exam arrangements with the exam provider.