FRM Part II · FRM Exam Part II · Risk Governance
A bank's board receives a monthly operational risk report containing forty pages of raw loss event listings with no commentary. Which change would best align the report with good practice for risk reporting to senior management and the board?
The report should be concise and decision-oriented, linking losses and indicators to risk appetite, highlighting emerging issues and stating required actions. Raw event listings overwhelm the board, while restricting distribution or reporting only large losses would hide information needed for oversight.
- AAdd more event listings so the report is exhaustive
- BProvide concise, decision-oriented information that links losses and indicators to risk appetite, highlights emerging issues and states required actionsCorrect
- CSend the report only to the operational risk department
- DReport only losses above the regulatory capital threshold
Explanation
Effective board reporting is concise, relevant and tied to risk appetite, flags emerging risks and the actions needed. Volume of raw data hinders decisions, and restricting circulation or reporting only the largest losses omits information boards need.
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