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FRM Part I · FRM Exam Part I · Principles for Effective Data Aggregation and Risk Reporting

Under the BCBS 239 principles on risk reporting practices, which characteristic best describes the requirement that risk management reports be accurate?

Accuracy means risk reports precisely and reliably convey aggregated risk data and exposures. Approximations are acceptable if they are reliable and suitable for the decision, supported by reconciliation and validation controls. Producing reports frequently, including everything, or having business lines prepare them does not make reports accurate.

  1. AReports must be produced at the highest possible frequency regardless of data quality
  2. BReports must precisely convey aggregated risk data and exposures, with approximations being reliable and the level of accuracy appropriate to the decision being supportedCorrect
  3. CReports must contain every risk metric the bank has ever calculated
  4. DReports must be prepared only by the business lines that originate the risk

Explanation

BCBS 239 requires risk reports to convey aggregated risk data accurately and reliably, with controls such as reconciliation and validation. Approximations are acceptable where they are reliable and fit for the decision. Frequency and volume do not substitute for accuracy, and independence from risk-taking units is expected.

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