FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting
A bank's board receives a 200-page risk report each month that contains every exposure limit and metric, with little commentary. Which BCBS 239 reporting principle is most directly breached?
The clarity and usefulness principle is breached. Reports must convey information concisely and in a form suited to the recipients, with meaningful commentary, so decision-makers can act on it. A 200-page report with every metric and no explanation overwhelms the board, even though it may be technically complete.
- AClarity and usefulness, because the report does not communicate information concisely and in a form suited to the recipients' needsCorrect
- BAdaptability, because the report cannot generate data during stress
- CCompleteness, because the report includes too many metrics
- DDistribution, because the report is sent to the board rather than to business lines
Explanation
Clarity and usefulness calls for reports that are easy to understand, comprehensive but not overloaded, and tailored to recipients, with enough commentary to support decisions. An overlong, uncommented report fails this. Completeness is about covering all material risks, so including more does not breach it. Board distribution is appropriate.
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