FRM Part II · FRM Exam Part II · Governance
A bank's board risk committee receives a quarterly credit risk report. Which feature would make the report most useful for the committee's governance oversight role?
The most useful board report aggregates exposures against approved risk appetite limits and highlights breaches, trends and escalation status. This lets the committee exercise oversight and make decisions, whereas loan-level detail, a single expected loss figure, or only historical data does not support effective governance.
- ALoan-level details of every exposure above a minimal threshold, without summaries
- BAggregated exposures against board-approved risk appetite limits, with breaches, trends and escalation status highlightedCorrect
- COnly the expected loss figure for the total portfolio, to keep the report short
- DHistorical charge-off data without any forward-looking indicators
Explanation
Board-level reporting should be concise and decision-useful. It should compare exposures with approved appetite and limits, flag breaches and trends, and show escalation. Loan-level detail overwhelms the board, and a single expected loss number or backward-looking data hides concentrations and emerging risks.
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