Valid 8020 Dumps shared by ExamDiscuss.com for Helping Passing 8020 Exam! ExamDiscuss.com now offer the newest 8020 exam dumps, the ExamDiscuss.com 8020 exam questions have been updated and answers have been corrected get the newest ExamDiscuss.com 8020 dumps with Test Engine here:
Which of the following is not an action available to management and the governing body to align the strategy with Risk Capacity.
Correct Answer: C
Step 1: Aligning Strategy with Risk Capacity Risk capacity is the maximum level of risk a firm can bear based on financial resources, earnings, and capital structure. Management can adjust risk capacity by modifying risk exposure, balance sheet size, or earnings retention. Step 2: Why Option C Is Incorrect Increasing dividends reduces retained earnings, which lowers capital reserves and reduces risk capacity. Firms seeking to improve risk capacity should retain earnings, not distribute them. Step 3: Why the Other Options Are Correct Option A ("Reduce scale of risks") → Correct as reducing balance sheet size lowers risk exposure. Option B ("Improve quality of risks") → Correct as taking on lower-risk assets improves stability. Option D ("Improve retained earnings") → Correct as more capital increases risk capacity. PRMIA Risk Reference Used: PRMIA Capital Management Framework - Defines risk capacity and earnings retention strategies. Basel III Capital Standards - Stresses retained earnings as a key factor in risk capacity. Final Conclusion: Reducing retained earnings through dividends weakens risk capacity, making Option C the correct answer.
