FRM Part II · FRM Exam Part II · Governance
A bank's board wants to strengthen risk culture. Which action most directly reinforces the 'tone from the top' in a credit risk context?
Senior management adhering to risk appetite limits and visibly challenging breaches best reinforces tone from the top, because culture is shaped by leaders' observable behavior and consistent enforcement, not by documents, tolerated exceptions, or delegation of responsibility.
- ASenior management consistently adheres to risk appetite limits and visibly challenges business lines that breach themCorrect
- BThe risk function publishes a detailed credit policy manual to all staff once a year
- CCredit officers are told that limit breaches will be tolerated when deals are profitable
- DThe board delegates all risk culture matters to the human resources department
Explanation
Tone from the top is demonstrated by leaders' own behavior and consistent enforcement of risk appetite. A policy manual alone is passive, tolerating breaches undermines culture, and fully delegating to HR removes board ownership.
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