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FRM Part II · FRM Exam Part II · Risk Reporting

An operational risk report shows a key risk indicator (KRI) for unreconciled payment items at 480 items against an amber threshold of 400 and a red threshold of 600. The indicator was 300 items three months ago and has risen every month. Which presentation is most useful to the senior risk committee?

The most useful presentation shows the current value against the thresholds, the rising trend, the root cause and the owner's dated action plan. The indicator is amber but moving toward red, so the committee needs context to intervene early; status only or smoothed averages would hide the deterioration.

  1. AShow only the current value, because thresholds already convey status
  2. BReport only the red/amber/green status without the numerical value to avoid false precision
  3. CReport the current value with thresholds, the trend, the root cause and the owner's action plan with datesCorrect
  4. DReport the average of the last twelve months to smooth volatility

Explanation

The indicator is in amber but trending toward red, so the committee needs the level, trend against thresholds, drivers and remediation ownership to act early. Status alone or a smoothed average hides the deterioration. The current value without trend misses the adverse direction.

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