Financial Risk Manager Part 1

Explanation

According to the Basel Committee's 3rd Principle, "Accuracy & Integrity," a bank should be able to generate accurate and reliable risk data to meet normal and stress/crisis reporting accuracy requirements. Data should be aggregated on a largely automated basis so as to minimize the probability of errors.

Why other options are incorrect:

• Option A (Governance): According to the principle of governance, a bank's risk data aggregation capabilities and risk reporting practices should be subject to strong governance arrangements consistent with other principles and guidance established by the Basel Committee. This principle suggests that risk data aggregation should be a central part of risk management, and senior management should make sure the risk management framework incorporates data aggregation before approving it for implementation.

• Option B (Completeness): According to the principle of completeness, a bank should be able to capture and aggregate all material risk data across the banking group. Data should be available by business line, legal entity, asset type, industry, region, and other groupings, as relevant for the risk in question, that permit identifying and reporting risk exposures, concentrations, and emerging risks.

• Option D (Timeliness): The timeliness principle focuses on the speed and frequency of risk data aggregation and reporting, requiring banks to be able to generate risk reports in a timely manner while also being able to accelerate reporting during times of stress.