FRM Part II · FRM Exam Part II · Risk Governance
A bank's board wants to apply the Basel Committee's principles for the sound management of operational risk. Which of the following is the board's responsibility under these principles?
The board approves and periodically reviews the operational risk management framework along with the risk appetite and tolerance statements. Daily identification, control testing and procedure writing are delegated to business line management, control functions and senior management, so they are not core board duties.
- AApproving and periodically reviewing the operational risk management framework and the bank's risk appetite and tolerance statementsCorrect
- BPerforming the day-to-day identification and assessment of operational risk in each business line
- CRunning the independent testing of every operational risk control
- DWriting the detailed procedures used to record loss events in the loss database
Explanation
The principles assign the board the task of approving and periodically reviewing the framework, including risk appetite and tolerance. Day-to-day identification and assessment sits with business line management, which is why the second option is wrong. Independent testing and detailed procedures are delegated to control functions and senior management.
Did you get it right without looking?
One question tells you little. A timed set on Risk Governance shows your real accuracy, how long you take and where you lose marks.
More Risk Governance questions
- A bank sets a quarterly operational loss tolerance of USD 12 million for each of its four business lines and an aggregate firm-wide appetite…
- A bank's board has approved an operational risk framework and wants to align with the Basel Committee's principles for the sound management …
- During a review, the chief risk officer finds that the first line routinely escalates operational loss events only after the second line ask…
- Which responsibility is most appropriately assigned to the board of directors within an operational risk governance framework?
- Under the three lines of defence approach described in the Basel principles, a bank's business unit head says that operational risk is the s…
- A bank's operational risk function currently reports to the head of the consumer lending division, who also sets its budget and bonus. The b…