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FRM Part II · FRM Exam Part II · Risk Measurement and Assessment

A bank wants to make its RCSA more reliable for a trading operations unit. Which design change most improves the objectivity of the assessment while retaining business ownership?

The best change is second-line facilitation and challenge of ratings, calibrated against loss data, key risk indicators, audit findings and control testing. This keeps first-line ownership but reduces bias and keeps ratings consistent and comparable across units.

  1. AHave the second line facilitate and challenge ratings, and calibrate them against internal loss data, KRIs, audit findings and control testing resultsCorrect
  2. BAllow each manager to set their own rating scale to reflect local conditions
  3. CReplace the RCSA with a single annual loss forecast prepared by finance
  4. DRemove control effectiveness ratings to simplify the process

Explanation

Using a common scale with second-line challenge and corroborating evidence such as losses, KRIs, audit and testing results reduces bias while the first line still owns the assessment. Unit-specific scales destroy comparability, and removing control ratings eliminates residual risk assessment.

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