Skip to content

FRM Part II · FRM Exam Part II · Risk Measurement and Assessment

A risk manager reviews RCSA results and notes that nearly every business unit rated its controls 'effective' and its residual risks 'low', yet loss event data show repeated losses in those same units. Which is the most appropriate response?

The risk manager should challenge the ratings through independent review, triangulating them against loss data, key risk indicators and audit findings. Self-assessments are subject to optimism bias, and conflicting objective evidence shows the ratings are unreliable, though RCSA itself remains valuable.

  1. AAccept the self-assessments because managers know their processes best
  2. BChallenge the ratings through independent review, comparing them with loss data, KRIs and audit findingsCorrect
  3. CEliminate the RCSA program and rely only on internal loss data
  4. DRaise the inherent risk ratings in all units by one level

Explanation

Self-assessments are prone to optimism and bias. A second-line challenge using objective evidence such as losses, KRIs and audit results corrects this. Abandoning RCSA discards forward-looking insight, and uniform adjustments are arbitrary.

Did you get it right without looking?

One question tells you little. A timed set on Risk Measurement and Assessment shows your real accuracy, how long you take and where you lose marks.

Practise Risk Measurement and AssessmentFree diagnostic mock

More Risk Measurement and Assessment questions