FRM Part II · FRM Exam Part II · Risk Governance
Which feature should a board-level operational risk report have to support effective governance?
A good board report is concise and forward-looking, linking key exposures, indicators and control weaknesses to risk appetite limits, with clear actions and owners. This helps directors make decisions, whereas excessive detail, backward-only totals or purely qualitative text weakens oversight.
- AExhaustive transaction-level loss detail so directors can verify every event
- BOnly backward-looking loss totals, to avoid speculation
- CConcise, forward-looking information linking key exposures, KRIs and control weaknesses to risk appetite limits, with clear actions and ownersCorrect
- DQualitative commentary without metrics, to avoid false precision
Explanation
Board reports should be concise and decision-useful, tying exposures and indicators to risk appetite and showing actions and ownership. Excessive detail obscures key messages, while purely historical or purely qualitative reports lack the insight needed for oversight.
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