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

A risk analyst's model produces a stress loss estimate that senior management dislikes. The head of trading asks the analyst to change an assumption, without any analytical justification, so the loss appears smaller in the board report. Which response best fits the GARP Code of Conduct?

The analyst should refuse to alter the assumption without valid analytical justification and ensure the analysis is not misrepresented. The GARP Code requires objectivity and bars knowing misrepresentation, so pressure from management, a hidden footnote, or omission of the result does not make the change acceptable.

  1. AChange the assumption, since senior management is responsible for the final report
  2. BChange the assumption but add a small footnote about the earlier result
  3. CRefuse to change the results without valid justification and ensure the analysis is not misrepresentedCorrect
  4. DRemove the stress loss from the report entirely to avoid conflict

Explanation

The Code requires objectivity and prohibits knowingly misrepresenting facts or analysis. Altering an assumption with no basis to please management compromises independence. A footnote or omitting the result still leaves the reporting misleading.

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