Skip to content

FRM Part I · FRM Exam Part I · The Governance of Risk Management

Which reporting arrangement for the Chief Risk Officer (CRO) is MOST consistent with good risk governance practice?

The CRO should report to the CEO and have direct, unfiltered access to the board risk committee. This gives the role enough stature and independence to challenge business lines and escalate concerns, without depending on the heads of units whose risk-taking the CRO oversees.

  1. AReporting solely to the head of trading to stay close to risk-taking
  2. BReporting to the CFO, with the CEO informed only of material breaches
  3. CReporting to the CEO with direct, unfiltered access to the board risk committeeCorrect
  4. DReporting to the head of internal audit to maintain independence

Explanation

Good practice gives the CRO sufficient stature, reporting to the CEO and having direct access to the board's risk committee, so that concerns are not filtered by those whose activities are overseen. Reporting to trading or the CFO weakens independence, and the CRO is a second-line role, not under internal audit.

Did you get it right without looking?

One question tells you little. A timed set on The Governance of Risk Management shows your real accuracy, how long you take and where you lose marks.

Practise The Governance of Risk ManagementFree diagnostic mock

More The Governance of Risk Management questions