FRM Part I · FRM Exam Part I · The Building Blocks of Risk Management
In a risk management framework, which function is primarily responsible for independently measuring and reporting risk exposures against the board-approved appetite, separate from the business lines that take the risk?
The independent risk management function is responsible, because it measures, monitors and reports exposures against the board-approved appetite without being subject to the revenue incentives of the business lines that take the risk.
- AThe independent risk management functionCorrect
- BThe front office trading desk
- CThe external audit firm
- DThe investor relations team
Explanation
Independent risk management measures, monitors and reports risk against appetite, free from revenue pressure. Front office takes risk, external auditors examine financial statements, and investor relations handles communication.
Did you get it right without looking?
One question tells you little. A timed set on The Building Blocks of Risk Management shows your real accuracy, how long you take and where you lose marks.
More The Building Blocks of Risk Management questions
- Which element is most characteristic of the 'three lines' structure within a risk management framework?
- A bank estimates that a loan portfolio has a one-year expected loss of USD 12 million. Over the same horizon, the 99.9% credit loss quantile…
- Two portfolios have the same Sharpe ratio, but Portfolio X has volatility of 10% and Portfolio Y has volatility of 20%. The risk-free rate i…
- Within a risk management framework, which feature most clearly distinguishes a risk limit from a risk appetite statement?
- A bank has total assets of USD 500 million, funded by USD 460 million of liabilities and USD 40 million of equity. Assets fall in value by 6…
- A financial intermediary's role in risk transformation is best illustrated by which of the following activities?