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FRM Part II · FRM Exam Part II · Risk Reporting

A bank's risk committee receives a monthly operational risk dashboard with 60 metrics. Committee members say they cannot tell which items need action, and some metrics rely on manually compiled data of uncertain quality. Which improvement best aligns with good risk reporting practice?

The best improvement is to focus on a smaller set of relevant, clearly defined metrics with thresholds and data-quality indicators, with drill-down available on demand. This makes the report usable for decisions and transparent about reliability, whereas adding metrics, dropping quantitative data, or reporting less often worsens overload or timeliness.

  1. AAdd further metrics so that every possible risk is covered
  2. BReplace quantitative metrics with narrative descriptions only
  3. CPrioritize a smaller set of relevant, clearly defined metrics with thresholds and data-quality indicators, drilling down on demandCorrect
  4. DSend the dashboard to the committee less frequently to reduce workload

Explanation

Effective reports are clear, useful and focused on decision needs, with escalation thresholds and transparency about data quality. Adding metrics worsens overload, removing quantitative content reduces objectivity, and lower frequency reduces timeliness.

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