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FRM Part II · FRM Exam Part II · Integrated Risk Management

A regional bank's board wants a single, consistent view of credit, market, operational and liquidity risks across all business lines, so that risk appetite can be set at the firm level rather than separately by each risk silo. Which approach best describes what the board is seeking?

The board is seeking enterprise risk management, which aggregates and coordinates all risk types across the firm into a consolidated view tied to firm-level risk appetite. Silo-based limits, insurance alone, or a trading-only VaR limit would not capture interactions among risks or provide firm-wide oversight.

  1. AEnterprise risk management that aggregates and coordinates risks across the whole firmCorrect
  2. BDelegating each risk type to its own specialist committee with independent limits
  3. CTransferring all risks to third parties through insurance
  4. DApplying a single VaR limit to the trading book only

Explanation

Enterprise (integrated) risk management looks at all risks on a firm-wide basis, considering interactions and diversification, and links them to risk appetite and strategy. Separate silo committees do not give a consolidated view, insurance addresses only some risks, and a trading-book VaR limit ignores other risk types.

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