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FRM Part I · FRM Exam Part I · Enterprise Risk Management and Future Trends

A firm deploys an AI tool to automate parts of its risk reporting. Which control best addresses the risk that the tool degrades over time as market conditions change?

Ongoing monitoring and periodic validation with defined escalation triggers best address model degradation. Market conditions change, causing performance drift, so a one-time pre-deployment check is insufficient, and removing human oversight or adding untested complexity would increase rather than reduce the risk.

  1. AOngoing monitoring and periodic validation of model performance with defined escalation triggersCorrect
  2. BOne-time validation before deployment only
  3. CRemoving human review to prevent bias
  4. DIncreasing the model's complexity without further testing

Explanation

Performance drift arises as conditions change, so continuous monitoring and revalidation with escalation triggers are needed. One-time validation misses drift, removing human review increases risk, and added complexity without testing worsens it.

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