Skip to content

FRM Part II · FRM Exam Part II · Risk Governance

A bank is preparing to launch a new payments product. The head of operational risk reviews the plan against the Basel operational risk principles. Which action best aligns with the principles on change management?

The bank should assess operational risk in the new product's processes and systems before launch and confirm that the risks fit within risk appetite as part of the approval process. Waiting for losses, relying only on vendor assurance, or reviewing only revenue and credit risk fails the principles.

  1. ADefer operational risk assessment until losses appear in the first year after launch
  2. BPerform a risk assessment of the new product's processes and systems before launch, and confirm that its risks are within appetite and the approval process covers operational riskCorrect
  3. CRely on the vendor's assurance that the system is secure and skip internal assessment
  4. DLimit the assessment to the product's expected revenue and credit risk

Explanation

The principles require that the approval process for new products, activities, processes and systems fully assess operational risk before introduction, with consideration of risk appetite. Waiting for losses is reactive, vendor assurance does not replace internal assessment, and ignoring operational risk leaves the key exposure unexamined.

Did you get it right without looking?

One question tells you little. A timed set on Risk Governance shows your real accuracy, how long you take and where you lose marks.

Practise Risk GovernanceFree diagnostic mock

More Risk Governance questions