FRM Part II · FRM Exam Part II · Risk Reporting
A bank's operational risk function is designing its reporting calendar. The board risk committee meets quarterly, while business-line managers must react to control failures as they occur. Which approach to report frequency best reflects sound risk reporting practice?
Report frequency should match the recipient's decision needs and how fast the risk changes. Fast-moving risks and limit breaches need timely escalation to managers, while the board gets periodic summaries. A single uniform quarterly or annual report fails to give those closest to the risk timely information.
- AProduce one identical comprehensive report each quarter for all recipients
- BSet report frequency by the recipient's decision needs and the risk's volatility, with more frequent reporting for fast-moving risks and escalation triggersCorrect
- CReport only when a loss exceeds the regulatory capital threshold
- DReport annually to avoid information overload, with ad hoc reports only on regulator request
Explanation
Sound practice ties the frequency of reporting to how quickly risks change and what decisions each audience must take. Fast-moving risks and breaches need timely escalation, while the board can receive summarised periodic reports. A single quarterly report leaves line managers without timely information.
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