Financial Risk Manager Part 1
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Which of the following goes against the principle of accuracy and integrity as set forth by the Basel Committee?
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TTanishq
A
It's most desirable to have a single authoritative source of risk data for each type of risk facing an organization.
B
Data should be aggregated manually at all times so as to minimize the probability of errors.
C
Risk personnel should have direct access to risk data so as to effectively refine, validate, reconcile, and process the data for use in reports.
D
Controls put in place to monitor risk data should be as robust as those used in financial accounting.
Explanation:
Explanation
Option B goes against the Basel Committee's principles of accuracy and integrity because:
- Basel Committee Principle: Data should be aggregated on a largely automated basis to reduce the risk of errors brought about by human input
- Manual Aggregation Issues: Manual data aggregation increases the probability of human errors, inconsistencies, and data integrity issues
- Best Practice: While some human intervention is necessary for professional judgment, the majority of data aggregation should be automated to ensure accuracy and consistency
- Contrast with Other Options:
- Option A supports having authoritative data sources (good practice)
- Option C supports direct access for validation (good practice)
- Option D supports robust controls (good practice)
Key Takeaway: The Basel Committee emphasizes automated data processes to minimize human error while allowing for necessary professional judgment when required.
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