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FRM Part II · FRM Exam Part II · Integrated Risk Management

After a near-miss event, a bank's chief risk officer wants the ERM framework to ensure that risk information reaches the board in a timely and useful way. Which action best achieves this?

The best action is to give the board concise, forward-looking aggregate reports measured against risk appetite, with clear escalation triggers for breaches and emerging risks. Raw transaction data, loss-only reporting or annual summaries are either too detailed, too backward-looking or too infrequent to support timely decisions.

  1. AProviding the board with detailed transaction-level data for every business each month so nothing is omitted
  2. BReporting only losses that have already crystallised, to keep reports factual
  3. CProducing concise, forward-looking aggregate reports against appetite, with defined escalation triggers for breaches and emerging risksCorrect
  4. DDelegating all risk reporting to business units, with the board receiving only annual summaries

Explanation

Effective risk reporting is aggregated, forward-looking, comparable to appetite and linked to escalation triggers so the board can act. Excess detail hides key messages, backward-looking loss-only reports miss emerging risks, and annual summaries are not timely.

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