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FRM Part I · FRM Exam Part I · GARP Code of Conduct

A risk analyst at a bank learns that her spouse has just been hired by a vendor that the bank's risk department is evaluating for a model-validation contract. Under the GARP Code of Conduct, what should the analyst do first?

She should disclose the spousal relationship to her employer and recuse herself from evaluating the vendor. The GARP Code requires disclosure of actual or potential conflicts of interest and avoiding compromised judgment. Concealing it or manipulating scores to compensate would breach the Code.

  1. ADisclose the relationship to her employer and recuse herself from the vendor evaluationCorrect
  2. BContinue the evaluation but give the vendor a lower score to offset any bias
  3. CResign from the FRM program until the contract is awarded
  4. DKeep the information private because the relationship is outside her professional duties

Explanation

The Code requires members to disclose actual or potential conflicts of interest so that their independence is not compromised. Disclosing and stepping back from the decision addresses the conflict directly. Adjusting scores deliberately is itself a biased act and keeping the matter private conceals the conflict.

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