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FRM Part II · FRM Exam Part II · Risk Identification

A bank's operations team documents a trade settlement workflow by drawing each step, the owner of each step, the systems used and the hand-offs between teams, then marks points where errors or fraud could occur. Which operational risk identification benefit is MOST directly delivered by this activity?

Process mapping most directly exposes control gaps, manual hand-offs and single points of failure across the end-to-end workflow. It is a qualitative identification technique, so it does not generate a loss quantile, replace key risk indicators, or move accountability from the first line to the second line.

  1. AExposing control gaps, manual hand-offs and single points of failure within the end-to-end processCorrect
  2. BProducing a statistically robust estimate of annual loss at the 99.9% confidence level
  3. CReplacing the need for key risk indicators by capturing all risk exposure in one diagram
  4. DTransferring accountability for the process from the first line to the second line

Explanation

Process mapping makes the sequence of activities, owners, systems and hand-offs visible, so weak controls, manual interventions and dependencies can be spotted. It is a qualitative identification tool and does not produce a capital estimate, replace KRIs, or shift ownership away from the first line.

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