FRM Part II · FRM Exam Part II · Risk Governance
Which activity is most clearly a second-line responsibility in an operational risk governance framework?
Developing the operational risk framework and challenging business units' assessments and reporting is a second-line task. The second line oversees and monitors risk independently of the business. Running controls is first line, independent audit is third line, and approving risk appetite belongs to the board.
- ADeveloping the operational risk framework and challenging business units' risk assessments and reportingCorrect
- BExecuting day-to-day controls such as trade confirmations
- CConducting independent audits of the effectiveness of the risk framework and reporting to the audit committee
- DApproving the bank's risk appetite as the ultimate governing body
Explanation
The second line designs the risk framework, provides oversight and effective challenge, and monitors and reports on risk. Executing controls is first line, independent audit is third line, and approving risk appetite is a board responsibility.
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