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FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting

A bank's internal review finds that its aggregated credit risk data exclude a subsidiary's exposures because the subsidiary was deemed immaterial, though no formal materiality assessment was documented. The bank can reconcile the remaining data to its accounting records. Which conclusion is most consistent with the principles on risk data aggregation capabilities?

Completeness is not demonstrated. The principles require material risk data across the group to be captured, and any exclusion must rest on a documented materiality assessment and be identified to management. Reconciling the remaining data to accounting records supports accuracy but does not establish completeness.

  1. AThe bank meets completeness since reconciliation to accounting records is achieved
  2. BThe bank meets the principles provided that the excluded exposures are reported annually
  3. CThe bank fails completeness because any exclusion of data breaches the principles regardless of materiality
  4. DThe bank's completeness is not demonstrated because exclusions should be based on a documented materiality assessment and disclosedCorrect

Explanation

Completeness requires capturing all material risk data across the group. Exclusions are permitted only where they are immaterial, with materiality documented and the exclusion disclosed to management. Reconciliation to accounting supports accuracy but does not prove completeness. Saying any exclusion breaches the principle is too strict.

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