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Answer: The completeness principle recommends that a financial institution capture data on its entire scope of material risk exposures.
The correct answer is B. The completeness principle recommends that a bank be able to capture and aggregate all data on the material risks to which it is exposed across the organization. This allows the bank to effectively identify, report, and manage risk exposures and concentrations, and to set appropriate exposure limits. The other options are incorrect for the following reasons: A is incorrect because the integrity principle emphasizes the generation of accurate and reliable risk data, but it allows for a largely automated process with some manual intervention to minimize errors. C is incorrect as the adaptability principle focuses on a bank's ability to generate aggregate risk data for a wide range of reporting needs, including during stress/crisis situations, rather than frequent updates to incorporate best practices. D is incorrect because the accuracy principle (principle 7) highlights the need for risk management reports to accurately and precisely convey aggregated risk data, requiring reconciliation and validation, rather than reconciliation with management's rough approximations prior to aggregation.
Author: LeetQuiz Editorial Team
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The Chief Risk Officer (CRO) at a financial institution is evaluating the company's techniques for managing risk data. To improve the robustness and efficiency of these risk data aggregation capabilities, the Basel Committee has outlined several key principles. Considering the various characteristics of the data, which of the following statements correctly represents a guideline that the bank should follow according to the Basel Committee's principles for effective risk data aggregation and reporting?
A
The integrity principle recommends that data aggregation be completely automated without any manual intervention.
B
The completeness principle recommends that a financial institution capture data on its entire scope of material risk exposures.
C
The adaptability principle recommends that a bank frequently update its risk reporting systems to incorporate changes in best practices.
D
The governance principle recommends that the risk data be reconciled with management's rough approximations of risk exposure prior to aggregating the data.