FRM Part II · FRM Exam Part II · Risk Reporting
A global bank has several trading desks that record the same counterparty under different legal-entity names and codes. As a result, the group view of exposure to that counterparty is understated in aggregated reports. What is the most effective remediation aligned with strong data architecture?
Create a single authoritative source of counterparty reference data with a unique legal entity identifier and parent-child hierarchy mapping used by all systems. This fixes the root cause so exposures aggregate consistently, whereas manual adjustments, slower reporting or footnotes leave understated exposure and error risk.
- AAdd a manual adjustment each month in the board report to reflect estimated missing exposure
- BReduce the reporting frequency so reconciliation can be done more thoroughly
- CEstablish a single golden source with a unique legal entity identifier and hierarchy mapping used across all systemsCorrect
- DAllow each desk to keep its own naming convention but document the differences in a footnote
Explanation
The root cause is inconsistent reference data. A common counterparty identifier and hierarchy maintained in a single authoritative source lets exposures aggregate automatically and consistently. Manual adjustments are error-prone and not scalable, lower frequency harms timeliness, and footnotes leave the understatement in place.
Did you get it right without looking?
One question tells you little. A timed set on Risk Reporting shows your real accuracy, how long you take and where you lose marks.
More Risk Reporting questions
- A bank's second-line risk team reviews its operational risk reports annually. Which review activity best demonstrates that the reports remai…
- A bank can produce its standard monthly risk report but cannot quickly aggregate exposures by a new dimension, such as by sector and country…
- A bank reports operational risk metrics quarterly. Over the year, reported loss amounts are stable and all KRIs are green, yet an internal a…
- Under BCBS 239, which statement best describes the responsibility of a bank's board and senior management for risk data aggregation and repo…
- A bank finds that its credit risk and market risk reports use different legal-entity hierarchies and different definitions of the same count…
- A bank's operational risk report to the board is 120 pages of raw loss-event tables with no summary, and the key trends are hard to find. Wh…