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FRM Part II · FRM Exam Part II · Risk Reporting

An internal audit review of a bank's operational risk reports finds that the format has not changed in six years, several metrics are no longer used in decisions, and recipients rarely read the appendices. What is the most appropriate recommendation regarding report review?

The bank should set up a periodic review of its risk reports to test relevance, accuracy and usefulness, drop metrics nobody uses and gather recipient feedback. Reports must evolve with the business and risks; simply adding metrics or freezing format reduces their value for decisions.

  1. ALeave the reports unchanged to preserve comparability of historical data
  2. BAdd further metrics to the reports so no risk is overlooked
  3. CEstablish a periodic review process to assess report relevance, accuracy and usefulness, retiring unused metrics and incorporating recipient feedbackCorrect
  4. DDelegate content decisions solely to the report preparers

Explanation

Reports should be reviewed regularly for fitness for purpose as the business, risks and user needs evolve. Removing unused metrics and gathering feedback improves clarity. Adding metrics worsens overload, and preparers alone cannot judge user needs.

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