Financial Risk Manager Part 2
Get started today
Ultimate access to all questions.
An investment management company, determined to strengthen its internal control framework, has recently established an independent risk management unit (RMU). The company's management has assigned an analyst the responsibility of creating a comprehensive summary report that outlines the tasks and responsibilities of this new unit. To ensure the report is thorough, what would be an appropriate activity for the analyst to include when defining the obligations of the RMU?
An investment management company, determined to strengthen its internal control framework, has recently established an independent risk management unit (RMU). The company's management has assigned an analyst the responsibility of creating a comprehensive summary report that outlines the tasks and responsibilities of this new unit. To ensure the report is thorough, what would be an appropriate activity for the analyst to include when defining the obligations of the RMU?
Explanation:
The correct answer is D. Assess the quality of models used to measure risk. This is because one of the primary responsibilities of the Risk Management Unit (RMU) in an investment management firm is to evaluate the effectiveness and accuracy of the models that are utilized to measure and quantify portfolio risk. This includes processes such as backtesting and validation to ensure that the models are reliable and provide accurate risk assessments. The other options listed (A, B, and C) are not the duties of the RMU but rather pertain to the roles and responsibilities of investment managers or the portfolio management function. Option A relates to the selection of tools and research for trading decisions, option B involves generating Value at Risk (VaR) levels in line with risk planning targets, and option C pertains to overseeing the development of asset valuation models, all of which are outside the scope of the RMU's core responsibilities.