FRM Part II · FRM Exam Part II · Risk Reporting
A bank's operational risk team is redesigning its quarterly board risk report. Board members have said the current 60-page document makes it hard to see what needs a decision. Which design change best aligns with good risk reporting practice?
The best change is a concise executive summary that highlights key exposures, appetite breaches and decisions needed, with supporting detail in appendices. Good risk reports are tailored to the audience and focus on material issues; dumping all indicators or removing quantitative or forward-looking content reduces usefulness.
- AAdd a concise executive summary highlighting key risk exposures, breaches of appetite and decisions required, with detail in appendicesCorrect
- BRemove all forward-looking information so the report contains only verified historical loss data
- CPresent every key risk indicator for every business unit in the main body to ensure completeness
- DReplace all quantitative metrics with qualitative color ratings to simplify the message
Explanation
Effective reports are tailored to the audience, focus on material issues and make required actions clear. An executive summary with supporting appendices does this. Putting every indicator in the main body worsens the overload, and removing forward-looking content or all quantitative data reduces decision usefulness.
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