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FRM Part II · FRM Exam Part II · Risk Governance

A bank's operational risk function receives loss event data from business units. The Chief Risk Officer notices that several units report losses late and in inconsistent formats, so the aggregated board report cannot be relied upon. Which governance improvement most directly addresses this weakness in risk data aggregation and reporting?

Establishing a common data taxonomy with defined reporting timelines and assigned data ownership is the best fix. It tackles inconsistent formats and late submissions at the source, whereas more capital, less frequent reporting or moving collection to audit would not improve data quality or independence.

  1. AIncreasing the operational risk capital buffer held against the affected units
  2. BEstablishing a common data taxonomy and a defined reporting timeline with data ownership assigned to each unitCorrect
  3. CReducing the frequency of board reporting to quarterly so units have more time
  4. DShifting responsibility for loss data collection entirely to internal audit

Explanation

The problem is data quality, timeliness and consistency. A common taxonomy, clear data ownership and set deadlines address these directly. Extra capital does not fix reporting, and giving internal audit data collection would compromise its independence as the third line.

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