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CFA Level I · CFA Level I Exam · Introduction to Risk Management

Which of the following is most likely a benefit of centralizing risk management under a single enterprise-wide framework, compared with managing risks separately in each business unit?

Centralized enterprise risk management lets an organization evaluate risks in aggregate, including how they correlate across business units. This gives a view of total exposure that siloed management misses. It does not eliminate risk, and it replaces rather than encourages independent unit-level tolerances.

  1. AIt removes all risks from the organization
  2. BIt allows risks to be evaluated in aggregate, including their correlations across unitsCorrect
  3. CIt lets each unit set its own risk tolerance independently

Explanation

An enterprise-wide approach lets the organization view total risk exposure and see how risks interact or offset across units. It cannot eliminate all risks, and independent unit tolerances are a feature of a siloed approach, not the centralized one.

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