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Exam Review

Key Facts: Associate PRM Exam

100 Qs

Practice Questions

OpenExamPrep

2 hrs

Exam Time (CBT)

PRMIA

60%

Passing Score

PRMIA

~$525

Exam Fee

PRMIA (member discount)

8

Domains Tested

PRMIA Associate PRM AOK

Pearson VUE

Delivery Provider

PRMIA

The Associate PRM is PRMIA's entry-level risk certificate — a single 2-hour multiple-choice CBT delivered via Pearson VUE with a 60% passing standard. It is designed for early-career risk staff and for adjacent audit, accounting, legal and IT staff who interface with risk. The exam covers risk-management concepts and frameworks (COSO ERM, ISO 31000, three lines of defence, appetite vs tolerance vs capacity, KRIs), financial markets and instruments (stocks, bonds, derivatives, OTC vs exchange, put-call parity), statistics for risk (mean/median/mode, std dev, normal distribution 68-95-99.7, correlation, OLS, hypothesis testing), credit-risk basics (PD × LGD × EAD = EL, S&P/Moody's/Fitch ratings, Merton intuition), market-risk basics (VaR α-quantile, parametric vs historical vs Monte Carlo, ES as TVaR), operational-risk basics (Basel definition, seven L1 event types, RCSA, ORX, SA-OR), liquidity and funding (LCR ≥100%, NSFR ≥100%, HQLA Levels 1/2A/2B), and PRMIA's Code of Conduct plus Basel III capital ratios (CET1 4.5%, Tier 1 6%, Total 8% + buffers).

Sample Associate PRM Practice Questions

Try these sample questions to review concepts for the Associate PRM exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which of the following BEST distinguishes 'risk' from 'uncertainty'?
A.Risk and uncertainty are interchangeable terms in modern risk management
B.Risk involves outcomes whose probabilities can be estimated; uncertainty involves outcomes whose probabilities cannot be quantified
C.Risk only refers to negative outcomes; uncertainty only refers to positive outcomes
D.Risk is always insurable; uncertainty is always uninsurable
Explanation: The classical Knightian distinction is that risk refers to situations where outcomes and their probabilities can be quantified (e.g. via historical data or models), while uncertainty refers to situations where probabilities are unknown or unknowable. Practical risk management focuses on quantifiable risks while flagging deep uncertainty for scenario analysis.
2A speculative risk differs from a pure risk because:
A.Speculative risk involves only loss; pure risk involves loss or gain
B.Speculative risk involves the possibility of gain or loss; pure risk involves only the possibility of loss or no loss
C.Pure risk is faster to materialise than speculative risk
D.Speculative risk is always insurable
Explanation: Pure risks (e.g. fire, theft) have only two outcomes — loss or no loss — and are typically insurable. Speculative risks (e.g. equity investing, FX trading) have three outcomes — loss, no loss, or gain — and are generally not insurable because there is upside.
3In risk-management terminology, which term refers to a CONDITION that increases the chance or severity of a loss (e.g. oily rags in a workshop)?
A.Peril
B.Hazard
C.Exposure
D.Loss event
Explanation: A hazard is a condition that increases the probability or severity of loss. A peril is the proximate cause of loss (e.g. fire). Exposure is the asset or party at risk. Distinguishing these terms is foundational to operational and insurance risk vocabulary.
4A 'moral hazard' refers to:
A.A physical condition that increases loss frequency
B.A change in behaviour caused by the existence of insurance or another risk-transfer arrangement that increases the probability or severity of loss
C.An ethical violation by a financial professional
D.A natural-disaster exposure that cannot be priced
Explanation: Moral hazard arises when a party insulated from risk behaves differently than they would if fully exposed — for example, taking more risk because losses are insured or guaranteed. It contrasts with morale hazard (carelessness from indifference) and physical hazards (tangible conditions).
5Expected loss in basic risk-management terms is approximated by:
A.Frequency × Duration
B.Frequency × Severity
C.Severity ÷ Frequency
D.Probability × Confidence Level
Explanation: At its simplest, expected loss = frequency (how often the event occurs) × severity (loss given the event). This is the foundation of credit-risk EL = PD × LGD × EAD and of operational-risk loss distribution thinking.
6Enterprise Risk Management (ERM), as defined by COSO's 2017 framework, is BEST described as:
A.A regulatory capital calculation for banks
B.The culture, capabilities and practices, integrated with strategy and execution, that organisations rely on to manage risk in creating, preserving and realising value
C.A statistical model for credit losses
D.A scenario analysis exercise performed annually for regulators
Explanation: COSO's 2017 update — 'Enterprise Risk Management — Integrating with Strategy and Performance' — defines ERM as the culture, capabilities and practices integrated with strategy and execution. It emphasises that risk management exists to create, preserve and realise value, not merely to avoid loss.
7Which international risk-management standard provides principles, framework and process guidance and is structured around the plan-do-check-act cycle?
A.Basel III
B.ISO 31000
C.IFRS 9
D.Solvency II
Explanation: ISO 31000 is the global risk-management standard that provides principles, a framework and a process for managing risk. It is sector-agnostic and is widely cited alongside COSO ERM in PRMIA materials. Basel III, IFRS 9 and Solvency II are sector-specific regulatory frameworks.
8Under the Three Lines of Defence model, a business-unit manager who owns a process and the controls over it sits in the:
A.First line
B.Second line
C.Third line
D.Outside the model
Explanation: The first line of defence comprises business and operational management — the risk owners who run day-to-day activities and the controls embedded within them. The second line provides independent oversight (risk and compliance functions); the third line is internal audit, providing independent assurance to the board.
9Which function MOST clearly belongs to the second line of defence?
A.Trading desk supervision
B.Independent operational risk management and compliance
C.Internal audit
D.External regulators
Explanation: The second line consists of independent risk-management and compliance functions that set policy, challenge first-line decisions and aggregate enterprise-wide risk reporting. Trading desks are first line, internal audit is third line, and regulators sit outside the model.
10Which statement BEST distinguishes risk APPETITE from risk TOLERANCE?
A.Appetite is the maximum risk the firm could survive; tolerance is the amount it wants to take
B.Appetite is the aggregate amount of risk the firm is WILLING to take in pursuit of strategy; tolerance is the acceptable variation around appetite/objectives
C.Appetite and tolerance are synonyms
D.Tolerance is a board-approved statement; appetite is a desk-level limit
Explanation: Risk appetite is the aggregate amount and types of risk a firm is willing to accept in pursuit of strategy. Risk tolerance is the acceptable variation around specific objectives — narrower and more measurable. Risk capacity is the maximum the firm could absorb without breach of regulatory or going-concern thresholds.

About the Associate PRM Exam

The PRMIA Associate Professional Risk Manager (Associate PRM) Certificate is PRMIA's entry-level credential — a single multiple-choice exam covering the core vocabulary and tools of risk management. It is designed for staff entering risk management AND for adjacent professionals in audit, accounting, compliance, legal or IT who interface with risk and need a working knowledge of the discipline. The exam covers risk-management concepts and frameworks (COSO ERM, ISO 31000, three lines of defence, risk appetite/tolerance/capacity, KRIs), financial markets and instruments (equities, bonds, derivatives, OTC vs exchange), statistics for risk (descriptive statistics, normal distribution, correlation, OLS, hypothesis testing), credit-risk basics (PD, LGD, EAD, EL, ratings), market-risk basics (VaR, ES, parametric vs historical vs Monte Carlo), operational-risk basics (Basel definition, seven L1 event types, RCSA, KRIs, ORX), liquidity and funding (LCR, NSFR, HQLA), and PRMIA's Code of Conduct and Standards of Best Practice.

Exam sponsor: PRMIA. The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Questions

100 questions

Time Limit

2 hours (CBT)

Passing Score

60%

Exam / Certification Fees

~$525 (PRMIA member discount)

Exam sponsor website

Reported exam pass rate: Not published. PRMIA does not publish Associate PRM pass rates Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

20%

Risk Management Concepts and Frameworks

Risk vs uncertainty, pure vs speculative risk, hazards/perils/exposures, frequency × severity, COSO ERM (2017), ISO 31000, three lines of defence, appetite vs tolerance vs capacity, KRIs, risk culture.

20%

Financial Markets and Instruments

Primary vs secondary, money vs capital, OTC vs exchange, equities, bonds (pricing, YTM, duration intuition), derivatives (forwards, futures, options including put-call parity, swaps), repo, mark-to-market vs mark-to-model.

15%

Statistics and Probability for Risk

Descriptive statistics (mean, median, mode, std dev, skewness, kurtosis), normal distribution (68-95-99.7), correlation and covariance, OLS regression and R², hypothesis testing (H₀, Type I/II error), basic distributions.

15%

Credit Risk Basics

PD, LGD, EAD, EL = PD × LGD × EAD, credit ratings (S&P AAA-D, Moody's Aaa-C, Fitch), credit spreads vs UST, Merton structural intuition, counterparty credit risk, concentration, fallen angels, wrong-way risk, EL vs UL.

10%

Market Risk Basics (VaR Intro)

Definition of VaR (α-quantile), regulatory 99% / 10-day, parametric vs historical vs Monte Carlo, Expected Shortfall (TVaR), backtesting, market risk sub-types (IR, equity, FX, commodity), stress testing.

10%

Operational Risk Basics

Basel OR definition (includes legal, excludes strategic/reputational), seven Level 1 event types (internal fraud, external fraud, EPWS, CPBP, damage to physical assets, BDSF, EDPM), RCSA, KRIs, ORX consortium loss data, Basel III SA-OR.

5%

Liquidity Risk and Funding

Market liquidity (bid-ask, depth) vs funding liquidity (cash-flow gap), Basel III LCR ≥100% (HQLA / 30-day Net Cash Outflow), NSFR ≥100% (ASF / RSF over 1 year), HQLA Levels 1/2A/2B, funding gap analysis.

5%

PRMIA Standards and Best Practices

PRMIA Code of Conduct, Standards of Best Practice, conflicts of interest, PRMIA vs GARP, Basel three pillars (Pillar 1 capital, Pillar 2 SREP, Pillar 3 disclosure), Basel III CET1 4.5%, Tier 1 6%, Total 8% plus buffers (conservation 2.5%, countercyclical 0-2.5%).

Preparing for the Associate PRM Exam

What You Need to Know

  • Passing score: 60%
  • Exam length: 100 questions
  • Time limit: 2 hours (CBT)
  • Exam / certification fees: ~$525 (PRMIA member discount) Official sources

Using Our Practice Resources

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

Associate PRM: Suggested Study Strategy

1Memorise the four risk-treatment options (avoid, reduce, transfer, accept) and the three lines of defence (1st = business and risk owners; 2nd = independent risk and compliance; 3rd = internal audit) — both come up repeatedly in different wrappers
2Drill the three definitions: appetite (aggregate risk willing to accept), tolerance (acceptable variation around objectives), and capacity (maximum the firm could absorb) — exam likes to test these as a triplet
3Lock in EL = PD × LGD × EAD with a worked example (e.g. 2% × 45% × $10m = $90,000) and know that credit RATINGS run AAA/AA/A/BBB (S&P) and Aaa/Aa/A/Baa (Moody's), with BB+/Ba1 being the highest junk grade
4Know the normal-distribution z-scores cold: 1.645 for 95% one-tail VaR, 2.33 for 99% one-tail VaR, plus the 68-95-99.7 rule for ±1/2/3 sigma
5Memorise Basel III capital minimums — CET1 4.5%, Tier 1 6.0%, Total 8.0% — plus the 2.5% capital conservation buffer and 0-2.5% countercyclical buffer; and the LCR ≥100% / NSFR ≥100% liquidity ratios

Frequently Asked Questions

What is the PRMIA Associate PRM Certificate?

The Associate Professional Risk Manager (Associate PRM) Certificate is PRMIA's entry-level credential. It is a single multiple-choice computer-based test delivered via Pearson VUE that covers the core vocabulary, frameworks and tools of risk management. The credential is open to anyone — no prerequisites — and is designed for staff entering risk management as well as for audit, accounting, compliance, legal and IT professionals who interface with risk.

What is the Associate PRM exam format?

The Associate PRM is a single multiple-choice CBT delivered via Pearson VUE in approximately 2 hours, with a passing standard of 60%. There are no formal prerequisites and the exam is offered globally on a flexible schedule. Candidates who do not pass may retake the exam by paying the exam fee again — there is no fixed limit on attempts.

What does the Associate PRM exam cover?

The exam covers eight domains: Risk Management Concepts and Frameworks (20%), Financial Markets and Instruments (20%), Statistics and Probability for Risk (15%), Credit Risk Basics (15%), Market Risk Basics including a VaR introduction (10%), Operational Risk Basics (10%), Liquidity Risk and Funding (5%), and PRMIA Standards and Best Practices (5%). It is broad and conceptual rather than deeply quantitative.

How is the Associate PRM different from the full PRM?

The full PRM is PRMIA's flagship designation — a four-exam programme covering finance theory, quantitative methods, market/credit/operational risk and case studies in depth. The Associate PRM is a SINGLE entry-level exam that introduces the same topics at a foundational level. Many candidates take the Associate PRM first and progress to the full PRM later; others use it as a stand-alone foundation for adjacent roles.

How much does the Associate PRM cost and what is the passing score?

The Associate PRM exam fee is approximately $525 (with a discount for PRMIA members). PRMIA sets a minimum passing standard of 60%. Retakes are available by paying the exam fee again. PRMIA does not publish detailed pass-rate statistics for the Associate PRM.

Who should take the Associate PRM?

PRMIA designs the Associate PRM for two audiences: (1) staff entering risk management roles in banks, asset managers, insurers or corporates who need a recognised foundation; and (2) auditing, accounting, legal, compliance and IT professionals who interface with risk-management teams and want shared vocabulary and frameworks. There are no eligibility prerequisites and the credential is global.