FRM Part II · FRM Exam Part II · Risk Governance
A bank's board has approved an operational risk framework and wants to align with the Basel Committee's principles for the sound management of operational risk. Which responsibility sits specifically with the board of directors rather than being delegated entirely to senior management?
The board must approve and periodically review the operational risk framework and the related risk appetite and tolerance statements. Detailed control design, daily reconciliations and loss data entry are management and business-line duties, not board responsibilities, because the board's role is oversight and setting direction.
- AApproving and periodically reviewing the operational risk management framework and the bank's risk appetite and tolerance statementsCorrect
- BDesigning the detailed control procedures for each business line process
- CPerforming daily reconciliation of trading and settlement breaks
- DMaintaining the loss event database and entering individual loss records
Explanation
Under the Basel principles, the board approves and periodically reviews the framework and ensures that risk appetite and tolerance are set. Detailed procedures, reconciliations and data capture are management and business-line tasks. The distractors describe operational activities, not board-level oversight.
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