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FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting

A bank produces credit risk reports whose figures reconcile with the general ledger only at quarter-end. Between quarter-ends, risk figures differ from finance data by amounts that staff cannot explain, and no documented validation exists. A reviewer wants the most appropriate remediation aligned with the accuracy and precision principle. Which action best fits?

The best remediation is regular reconciliation of risk reports to source data and accounting records, backed by documented validation and defined tolerances for explained differences. This addresses the accuracy and precision principle directly, whereas changing distribution, length or format leaves unexplained discrepancies and weak controls in place.

  1. AIncrease report distribution to more business units so differences are noticed
  2. BShorten the report so differences are less visible
  3. CEstablish regular reconciliation of risk reports to source data and accounting records, with documented validation and explained tolerancesCorrect
  4. DSwitch from quantitative to purely qualitative risk reporting

Explanation

Accuracy and precision principle calls for reconciliation with sources such as accounting data, automated controls, and documented validation, with tolerance levels for differences. Wider distribution, shorter reports, or qualitative-only reporting do not fix unexplained discrepancies or establish control over accuracy.

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