Financial Risk Manager Part 1
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In risk management within an organization, the board plays a crucial role. This role involves various responsibilities and tasks that contribute to the overall risk management strategy of the organization. Which of the following options best describes the primary role of the board in the risk management process?
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A
Issuing guidelines on how to manage risks
B
Developing the risk appetite statement
C
Regularly reviewing decisions made by managers regarding risk exposures
D
Choosing the risk exposures to hedge, the risks to mitigate, and those to avoid altogether
Explanation:
The board sits above the managers in the hierarchy of management in most for-profit organizations. The board assembles and develops a comprehensive risk appetite statement, specifying the risks the company should assume and those to avoid, including the preferred methods of risk mitigation. The managers consult the risk appetite statement when choosing the projects to undertake.
The board also delegates the responsibility for approving and reviewing the risk levels to the board risk management committee.
Option A is incorrect. Issuing guidelines on managing risks is the role of risk advisory managers.
Option C is incorrect: Regularly reviewing decisions made by managers regarding risk exposures is the role of the board risk management committee.
Option D is incorrect. Choosing the risk exposures to hedge, the risks to mitigate, and those to avoid altogether is the role of the risk advisory directors.
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