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

A regional bank's board wants its enterprise risk management (ERM) framework to give a single, firm-wide view of risk rather than separate views by silo such as credit, market and operational risk. Which feature most directly delivers this objective?

A firm-wide view comes from aggregating risks across the organisation using a common risk taxonomy and consistent measurement, with reporting to senior management and the board. Silo-specific metrics or VaR-only reporting keep risk views fragmented and incomplete.

  1. AHaving each business unit set its own risk metrics and report them only to its own management
  2. BAggregating risks across the firm using a common risk taxonomy and consistent measurement, reported to senior management and the boardCorrect
  3. COutsourcing all risk reporting to the external auditor
  4. DLimiting risk reporting to risks that can be quantified using VaR

Explanation

ERM integrates risks across business lines and risk types. A common taxonomy and consistent measurement allow aggregation and escalation to the board. Silo-specific metrics preserve fragmentation, and limiting reporting to VaR excludes risks that are hard to quantify.

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