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FRM Part II · FRM Exam Part II · Risk Governance

In a bank's annual staff survey, front-line employees report they fear negative career consequences for escalating operational incidents, and many incidents are discovered only by internal audit. Which conclusion is MOST appropriate?

The survey indicates a weak risk culture on transparency and escalation. Fear of consequences suppresses reporting, so low self-reported incident counts do not mean low risk and loss data are unreliable. Management should encourage open reporting and protect people who raise concerns.

  1. AThe risk culture is weak in the area of transparency and escalation, so management should encourage open reporting and protect those who raise concernsCorrect
  2. BThe culture is strong because few incidents are self-reported, which shows low risk
  3. CLoss data are reliable because audit finds the incidents eventually
  4. DThe issue is solely a data-capture system problem

Explanation

Fear of retaliation and underreporting indicate poor openness and escalation culture. Few self-reported incidents do not signal low risk but suppressed information, which makes loss data and risk assessments unreliable. Management should build psychological safety and protections, such as whistleblower channels.

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