Skip to content

FRM Part II · FRM Exam Part II · Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk)

A chief risk officer wants to build geopolitical risk into the firm's risk appetite framework. Which action is most appropriate?

The CRO should set scenario-based limits and early warning triggers tied to geopolitical risk indicators, with board escalation upon breach and regular review of hedges and concentrations. This embeds geopolitical risk into governance and appetite, whereas static limits, no concentration limits or unsupervised outsourcing leave gaps.

  1. ASet a single static limit unrelated to market conditions
  2. BDefine scenario-based limits and early warning triggers linked to geopolitical risk indicators, with escalation to the board when breached and periodic review of hedging and concentration exposuresCorrect
  3. CRemove country concentration limits to allow flexibility
  4. DDelegate geopolitical risk entirely to external vendors without internal oversight

Explanation

Effective integration uses forward-looking triggers, scenario-based limits, governance escalation and review of concentrations and hedges. Static limits, removing concentration limits and full outsourcing without oversight weaken governance.

Did you get it right without looking?

One question tells you little. A timed set on Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk) shows your real accuracy, how long you take and where you lose marks.

Practise Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk)Free diagnostic mock

More Global Financial Stability Report, April 2025, Chapter 2 (Geopolitical Risk) questions