FRM Part II · FRM Exam Part II · Risk Governance
Which action by the board best demonstrates the 'tone from the top' element of risk culture?
Senior leaders adhering to risk limits themselves and acting visibly on breaches, even by top producers, best shows tone from the top. Credibility comes from consistent modeling and enforcement, whereas publishing statements, requiring training or delegating to HR does not demonstrate leadership commitment.
- ADelegating all risk culture matters to the human resources department
- BSenior leaders consistently adhering to risk limits themselves and acting visibly on breaches, including by senior producersCorrect
- CPublishing the risk appetite statement on the intranet
- DRequiring junior staff to complete annual risk training
Explanation
Tone from the top is credible only when leaders model expected behavior and enforce consequences consistently, even for high earners. Publication and training are supportive but do not by themselves show leadership commitment, and delegating to HR abdicates board responsibility.
Did you get it right without looking?
One question tells you little. A timed set on Risk Governance shows your real accuracy, how long you take and where you lose marks.
More Risk Governance questions
- A bank's board wants to clarify responsibilities in its operational risk governance framework under the three lines of defense model. Which …
- A bank's board wants its risk appetite framework to be effective in practice. Which of the following actions is most consistent with sound g…
- In the three lines of defence model commonly used for operational risk governance, which function is primarily responsible for independently…
- A bank's board is reviewing its risk framework. Which statement best describes the relationship between risk appetite and risk limits in a s…
- A bank's internal audit department reports to the head of the retail banking division, which also owns many of the processes audit reviews. …
- In a bank using a three-lines model, the head of the business unit also sets the performance rating and pay of the unit's embedded risk offi…