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FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting

A bank's risk reports are produced through manual spreadsheets, and the internal audit finds the process is not reviewed by any independent function. Which BCBS 239 expectation about governance and infrastructure is most directly breached?

The expectation breached is independent validation. BCBS 239 requires risk data aggregation and reporting practices to be reviewed by independent, suitably skilled parties such as internal audit. It does not ban spreadsheets or require one vendor system, and review by the producing unit is not independent.

  1. ARisk data aggregation capabilities should be subject to independent validation, for example by internal audit or equally qualified expertsCorrect
  2. BBanks must replace all spreadsheets with a single vendor system
  3. CRisk reports must be produced only once a year
  4. DData aggregation need only be validated by the business line that produces the data

Explanation

BCBS 239 requires that a bank's risk data aggregation capabilities and reporting practices be subject to independent validation by staff with appropriate skills. It does not prohibit spreadsheets outright nor set an annual frequency. Validation by the producing business line is not independent.

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