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FRM Part II · FRM Exam Part II · Risk Identification

A bank's RCSA program has been running for five years. Review findings: ratings across business units cluster in the 'medium' band, scores rarely change year to year, action plans are seldom completed, and the assessments are not linked to loss events or KRIs. Which improvement would most directly address the weakness that RCSA results are not informing risk decisions?

The best fix is to integrate RCSA with loss data, KRIs and scenario analysis, use calibrated consistent rating criteria, and track action plans with accountable owners. The problems of clustered, static ratings and incomplete actions come from weak evidence, calibration and follow-through, not from frequency or template.

  1. AMove the RCSA from annual to monthly using the same template
  2. BIntegrate RCSA with loss data, KRIs and scenario analysis, apply calibrated rating criteria, and track action plans with accountable ownersCorrect
  3. CMake business units responsible for setting their own rating scales
  4. DReplace the RCSA with external loss data benchmarking only

Explanation

Clustering and static scores suggest weak calibration and no evidence base; unfinished actions show weak follow-through. Linking RCSA to other tools, using consistent criteria and tracking actions fixes these. A more frequent identical template adds burden, unit-set scales reduce consistency, and external data alone loses the internal control view.

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