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FRM Part II · FRM Exam Part II · Risk Reporting

A bank's risk function states that its risk data aggregation is 'accurate' because the numbers match the general ledger at quarter-end. However, during a stress event, management cannot obtain a consolidated view of exposure to a troubled counterparty within a day. Which risk data aggregation attribute is most clearly deficient?

Timeliness is the deficient attribute. The data reconcile to the ledger, so accuracy is not the issue, but management could not obtain a consolidated counterparty exposure within a day during stress. Sound aggregation requires rapid production of critical risk data in stress conditions, which this bank fails to deliver.

  1. AIntegrity of the data lineage
  2. BAdaptability of the reporting process
  3. CAccuracy of the ledger reconciliation
  4. DTimeliness of aggregationCorrect

Explanation

Reconciliation to the ledger shows accuracy exists. The inability to produce a consolidated counterparty exposure within a day during stress is a failure of timeliness, since banks should generate aggregated risk data rapidly in stress or crisis. Adaptability concerns ad hoc request flexibility more broadly, but the specific failing here is speed.

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