FRM Part II · FRM Exam Part II · Risk Measurement and Assessment
A risk manager notes that key risk indicator (KRI) data for a payments process are manually compiled by the process owners whose performance is evaluated against the same KRIs. Which data quality concern is most significant?
The main concern is bias or manipulation arising from a conflict of interest: process owners judged on the KRIs are also compiling them, so the indicators may be understated or smoothed. Independent review, automated source-system feeds and second-line challenge improve integrity and reliability.
- AInsufficient granularity of the loss event taxonomy
- BPotential bias or manipulation due to a conflict of interest in data reportingCorrect
- CExcessive timeliness of reporting
- DOver-reliance on external data
Explanation
When those being measured also compile the data, there is an incentive to under-report or smooth the indicators, undermining reliability and integrity. Independent validation or automated data feeds from source systems, with review by the second line, are the appropriate responses. The other options do not describe the conflict stated in the scenario.
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