FRM Part II · FRM Exam Part II · Risk Reporting
A bank's monthly operational risk report to executive management contains 40 KRIs. Analysis shows 28 have been green for over two years, 8 are frequently amber with no action owner, and 4 have exceeded red thresholds. Management rarely discusses the report. Which redesign is most consistent with sound reporting design?
The best redesign keeps the four red indicators and a prioritized set of leading KRIs in the main report, assigns owners to the amber ones, and periodically reviews whether long-green KRIs remain relevant. This makes the report actionable and accountable, unlike cosmetic changes, hiding breaches or reducing frequency.
- AKeep all 40 KRIs but increase font size and add more charts
- BRetain the 4 red indicators and a prioritized subset of leading indicators in the main report, assign owners to amber ones, and review the green KRIs' relevance periodicallyCorrect
- CDelete the 4 red indicators since they distort the overall picture and keep the 36 others
- DMove all KRIs to an annual report so that trends are more statistically significant
Explanation
Reports should focus on material, actionable information with clear accountability. Prioritizing breached and leading indicators, assigning owners to amber items and reviewing stale green KRIs for relevance improves usefulness. Removing red indicators or reducing frequency weakens oversight; cosmetic changes do not address the lack of focus and ownership.
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