FRM Part II · FRM Exam Part II · Risk Reporting
A mid-sized bank's operational risk function produces a single monthly report that is sent unchanged to the board, business-line heads and front-line supervisors. Business-line supervisors say it is too aggregated to act on, while board members say it is too detailed. Which change best aligns the frequency and content of reporting with sound risk reporting practice?
The best fix is to tailor content, detail and frequency to each audience: frequent, granular reports for operational managers who act on risks and concise, aggregated summaries for the board. One identical report suits no one, and less frequent or restricted distribution weakens risk control.
- ATailor report content, granularity and frequency to each audience's decision needs, with more frequent detailed reports for operational management and summarized reports for the boardCorrect
- BSend the full detailed report to every recipient weekly so that nobody lacks information
- CReduce reporting to an annual consolidated document to limit report preparation costs
- DLimit distribution to the board only, since it holds ultimate accountability for risk
Explanation
Effective risk reports are designed for their users: operational managers need granular, timely information to act, while senior management and the board need aggregated, forward-looking summaries. Sending identical weekly detail to everyone overloads senior readers, and annual or board-only reporting starves those who manage the risks.
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