FRM Part II · FRM Exam Part II · Risk Reporting
A bank's risk reports are produced quarterly. During a period of rapid growth in digital payments, a series of near-miss incidents occurs within weeks, but senior management learns of the pattern only at quarter-end. Which is the most appropriate response by the operational risk function?
The bank should keep the regular quarterly report but add event-driven or more frequent escalation when key risk indicators breach thresholds. Risk reporting frequency should match how quickly the risk changes, and near misses are valuable early signals that should not wait for quarter-end.
- AMaintain quarterly reporting but add more pages of historical loss data
- BIntroduce event-driven or higher-frequency escalation for key risk indicators breaching thresholds, in addition to the regular quarterly reportCorrect
- CReplace all periodic reporting with ad hoc reporting only
- DStop reporting near misses because they did not cause losses
Explanation
Reporting frequency should reflect how fast the risk profile changes and how severe the consequences are. Threshold-based escalation supplements periodic reports so emerging issues reach management promptly. Ad hoc only reporting loses trend and consistency, and near misses are valuable early-warning information.
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