FRM Part II · FRM Exam Part II · Risk Reporting
A bank's operational risk function is redesigning its quarterly report for the board risk committee. Which design choice best supports the committee's ability to oversee risk against its stated risk appetite?
The best design shows key risk indicators next to their approved thresholds, with breaches and trend direction highlighted. This ties reporting to risk appetite and lets the board see where action is needed, unlike exhaustive event lists, single totals or methodology detail.
- APresenting key risk indicators alongside their approved thresholds and showing breaches with trend directionCorrect
- BListing every operational loss event recorded in the period in chronological order with full technical detail
- CReporting only the aggregate loss amount for the year compared with the prior year
- DIncluding detailed descriptions of the modelling methodology used to calculate operational risk capital
Explanation
Board reports should link measured exposures to risk appetite so that directors can see where limits are approached or breached and in which direction. Exhaustive event listings bury the key messages, a single aggregate loss figure lacks context, and model methodology detail is not what supports appetite oversight.
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