CFA Level I · CFA Level I Exam · Introduction to Risk Management
Which of the following is most likely a responsibility of the risk governance function within a risk management framework?
Risk governance most likely sets the risk tolerance and defines who is accountable for risk decisions across the organization. It is a top-down oversight function that aligns risk-taking with strategy. Executing hedges and calculating daily profit and loss are operational activities, not governance responsibilities.
- AExecuting hedge trades for each portfolio manager
- BSetting the risk tolerance and defining accountability for risk decisions across the organizationCorrect
- CCalculating daily profit and loss for each trading desk
Explanation
Risk governance provides top-down oversight: it sets risk appetite and tolerance, assigns responsibilities, and establishes reporting lines. Trade execution and P&L calculation are operational tasks inside the business and support functions.
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