FRM Part II · FRM Exam Part II · Risk Identification
A bank is launching a new retail payments product within three months under tight timelines. The head of operational risk asks that a risk assessment be performed before launch. Which approach is most consistent with sound practice for identifying risks arising from this change?
A cross-functional new-product approval review before launch is best practice. It examines processes, people, systems and external dependencies proactively, because a new product has no loss history and waiting for incidents or focusing only on technology would leave significant risks unidentified.
- ARely on historical internal loss data, since the product has no prior losses to review
- BConduct a structured new-product approval review involving risk, compliance, technology and operations, assessing process, people, systems and external dependencies before launchCorrect
- CDefer risk identification until the first quarter of operation, when actual incidents provide data
- DLimit the review to technology risk since payments are system-driven
Explanation
Change creates risks not yet visible in loss history, so a cross-functional prelaunch review covering all risk drivers is needed. Loss data is backward looking and has none for a new product, deferring leaves risks unmanaged, and a technology-only view misses people, process, third-party and compliance risks.
Did you get it right without looking?
One question tells you little. A timed set on Risk Identification shows your real accuracy, how long you take and where you lose marks.
More Risk Identification questions
- A bank discovers that a single failure at a third-party payment processor caused a system outage, delayed customer payments, and resulted in…
- Which of the following is an advantage of the RCSA approach in identifying operational risks, compared with relying only on historical loss …
- A bank's operational risk function is building its risk taxonomy. A risk manager proposes classifying events by the underlying cause (people…
- A risk manager is building an emerging risk identification process. Which feature best distinguishes an emerging risk from an existing known…
- A bank records a USD 10 million loss from a rogue trader in 2021. By 2024 it discovers USD 4 million of related legal costs and recovers USD…
- A bank's operational risk stress test asks how a prolonged cloud provider outage would affect critical services. Which design feature best m…