Financial Risk Manager Part 1
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Olive Park is the head of risk management at a Korean Bank. She has been tasked with preparing a report for the bank's board of directors scheduled to meet in the near future. The report will inform several important decisions to be made by the board regarding relevant bank risks.
In an email sent to the directors prior to the meeting, Park assures them of the accuracy, reasonableness, and completeness of her submission. She points out that a large amount of quantitative data in the report will make it hard for the report to be fully understood by non-risk management professionals. She also plans to distribute the report to all the relevant parties in a timely manner while still maintaining confidentiality. Which of the following effective risk data aggregation principle set forth by the Basel Committee on Banking Supervision did Park most likely violate?
Other
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TTanishq
A
Principle 11 - Distribution
B
Principle 9 - Clarity and usefulness
C
Principle 8 - Comprehensiveness
D
Principle 1 - Governance
Explanation:
Explanation
Principle 9 of the Basel Committee on Banking Supervision's effective risk data aggregation principles emphasizes the importance of tailoring reports to meet the needs of the end user. In her email, Park indicated that the report might not be tailored to the board's needs due to the large amount of quantitative data that could be difficult for non-risk management specialists to interpret. The board typically includes many financial experts, but not all of them are proficient in risk management. It's crucial to recognize that different end users - managers, the board, junior employees, interns, and others - have varying reporting needs. As the report ascends the organization's leadership hierarchy, there is an increasing need for qualitative interpretation and explanation.
Why other options are incorrect:
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Choice A (Principle 11 - Distribution): This principle states that risk management data should be distributed among the relevant parties in a timely and secure manner. Park plans to distribute the report promptly while ensuring confidentiality, which aligns with this principle.
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Choice C (Principle 8 - Comprehensiveness): This principle requires that all material risk data be accurately and completely captured. Park has assured the accuracy, reasonableness, and completeness of her report which complies with this principle.
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Choice D (Principle 1 - Governance): This principle involves establishing a strong governance framework to oversee the bank's risk data aggregation capabilities. There's no information in the text indicating that Park violated this principle.
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