CERP study guide
CERP · Work through your exam, one topic at a time.
The Certified Enterprise Risk Professional (CERP) is one of the professional certifications conferred by the American Bankers Association, sitting alongside the CRCM, CTFA, CFMP, CAFP and CISP in ABA's certification family. ABA frames the program as a way to differentiate yourself from the competition and to demonstrate expertise in the enterprise risk field, and its marketing materials position the credential around credibility that managers and employers recognize, backed by an ongoing commitment to learning. The CERP study guide has 10 sections and about 3,433 words.
01Enterprise Risk Management Frameworks and Governance
COSO's 2017 ERM framework rests on five components - Governance and Culture; Strategy and Objective-Setting; Performance; Review and Revision; Information, Communication and Reporting - elaborated through 20 principles. Older material used the 2004 eight-component cube; questions often test whether you know which edition a component belongs to.
308 words, about 2 min02Risk Appetite, Strategy and Risk Culture
Risk capacity is the maximum risk the firm can bear before breaching binding constraints such as capital, liquidity or business-model viability. Risk appetite is the amount and type of risk the firm is willing to seek or accept in pursuit of its strategy.
683 words, about 3 min03Risk Identification, Assessment and Aggregation
Risk identification draws on risk registers and taxonomies, process mapping, RCSA workshops, incident and near-miss data, internal and external loss data, KRIs, scenario analysis, bow-tie and fault-tree analysis, horizon scanning, and value-chain or SWOT analysis. Identification is continuous, not an annual event; emerging and interconnected risks are the usual gaps.
297 words, about 1 min04Credit Risk Management
Expected loss EL = PD × LGD × EAD . Unexpected loss is the volatility around EL and is covered by capital; EL is covered by pricing and provisions.
319 words, about 2 min05Market, Liquidity and Interest Rate Risk
Sensitivities (Greeks, PV01, delta, vega) measure first-order exposure. VaR summarises potential loss at a confidence level over a horizon (e.g.
315 words, about 2 min06Operational and Technology Risk
Operational risk is loss from inadequate or failed internal processes, people, systems, or from external events. It includes legal risk and, per Basel, excludes strategic and reputational risk.
299 words, about 1 min07Compliance, Legal and Conduct Risk
Compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss to reputation a firm may suffer as a result of its failure to comply with laws, regulations, rules, self-regulatory standards and codes of conduct. The compliance function advises, monitors, trains and challenges; it should be independent of the business lines it oversees and have direct access to the board or a board committee.
310 words, about 2 min08Strategic, Reputational and Emerging Risk
Strategic risk arises from the strategy itself, its execution, or changes in the competitive, regulatory, technological or macroeconomic environment. It includes M&A integration risk, business-model disruption, and misallocating capital to a declining franchise.
323 words, about 2 min09Capital Planning, Stress Testing and Risk Quantification
Capital planning links risk appetite and the business plan to capital needs over a multi-year horizon. Distinguish regulatory capital (Pillar 1 minimums plus buffers - CET1 4.5%, Tier 1 6%, total capital 8%, plus conservation, countercyclical and G-SIB/D-SIB buffers) from economic capital (an internal estimate of unexpected loss at a chosen confidence level) and from available capital.
284 words, about 1 min10Risk Reporting, Monitoring and Board Oversight
Risk reporting should be decision-useful: concise, forward-looking, linked to appetite, and distinguishing exceptions from business as usual. Core elements include the risk profile against appetite and limits, KRIs with thresholds and trends, top and emerging risks, losses and incidents, stress results, and capital and liquidity positions.
295 words, about 1 min