FRM Part II · FRM Exam Part II · Risk Reporting
A bank's operational risk function is redesigning its monthly report for the board risk committee. Which feature would BEST make the report effective for this audience?
The best report is concise and forward-looking, linking key risk indicators and top risks to the risk appetite and flagging items for escalation. Boards need decision-useful information, not exhaustive event lists, model technicalities or a lone aggregate loss figure without context.
- AA complete listing of every loss event recorded in the period, with full transaction details
- BConcise, forward-looking information linking key risk indicators and top risks to the stated risk appetite, with clear escalation itemsCorrect
- CTechnical descriptions of the loss distribution model parameters used in capital calculation
- DOnly the aggregate net loss figure for the year to date, shown without comparatives
Explanation
Board-level reports should be concise, decision-useful and tied to risk appetite, highlighting breaches, trends and items needing escalation. Exhaustive event listings bury the key messages. Model parameter detail suits technical specialists, and a single aggregate figure with no comparatives gives no basis for judging trends or limits.
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