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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 deliver a firm-wide view of risk rather than separate views by business line. Which feature is most essential to achieving this aim?

The essential feature is aggregating risks across risk types and business lines with common definitions and metrics. This lets management see interactions and concentrations at firm level. Unit-specific taxonomies block aggregation, audit is an assurance role, and regulatory ratios do not capture all material risks.

  1. AAllowing each business unit to define its own risk taxonomy and metrics to preserve local ownership
  2. BAggregating risks across risk types and business lines using common definitions and metrics, so that interactions and concentrations are visible to senior managementCorrect
  3. CDelegating all risk reporting to the internal audit function to ensure independence
  4. DFocusing the framework on regulatory capital ratios, since they summarise all material risks

Explanation

An integrated ERM view requires consistent taxonomy and metrics so risks can be aggregated and interdependencies and concentrations seen at the top. Separate unit-specific definitions prevent aggregation. Audit provides assurance but does not own risk reporting, and regulatory ratios omit many risks.

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