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FRM Part II · FRM Exam Part II · Risk Identification

A bank's operational risk team wants to identify where errors, delays and control gaps could arise in its trade settlement activity. They document each step from trade capture to cash settlement, showing handoffs between teams, systems used and the controls at each point. Which risk identification tool is the team primarily using?

The team is using process mapping. Laying out every step, handoff, system and control from trade capture to settlement exposes where errors, delays and control gaps may arise, which is the purpose of process mapping as a forward-looking operational risk identification tool.

  1. AProcess mappingCorrect
  2. BKey risk indicator monitoring
  3. CLoss data scenario scaling
  4. DExternal data benchmarking

Explanation

Documenting each step, handoff, system and control in an end-to-end activity is process mapping. It reveals where failures and control gaps could occur. KRIs monitor metrics over time and do not lay out workflow steps; scenario scaling and external data benchmarking do not describe the process either.

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