Financial Risk Manager Part 1

Explanation

The correct answer is B because having multiple sources of risk data for each type of risk contradicts the governance principle established by the Basel Committee.

Key Points:

1. Basel Committee Governance Principle: The committee emphasizes strong governance arrangements for risk data aggregation and reporting, which includes having consistent, reliable, and integrated data sources.

2. Option A: This statement aligns with the governance principle as it emphasizes that risk data aggregation should be an integral part of the risk management framework.

3. Option B: This statement diverges from the governance principle because:

   • Multiple sources of risk data can lead to inconsistencies, data quality issues, and reconciliation problems
   • The Basel Committee advocates for integrated, consistent data sources rather than fragmented multiple sources
   • Having multiple sources increases operational risk and makes data aggregation more complex
   • Best practices recommend having a single, reliable source of truth for risk data

4. Governance Best Practices: Strong governance requires:

   • Clear data ownership and accountability
   • Consistent data definitions and formats
   • Reliable data quality controls
   • Integrated data architecture
   • Single source of truth for risk data

Therefore, option B represents a practice that would undermine effective risk data governance and aggregation capabilities.