Financial Risk Manager Part 1

Explanation

According to Principle 1 on Governance of the Basel Committee, the risk data aggregation capabilities and risk reporting practices of banks should be unaffected by their group structure. This principle emphasizes that these capabilities and practices should be fully documented, validated, and independently reviewed by individuals who are knowledgeable in IT, data, and risk reporting functions. Furthermore, senior management should make significant efforts to integrate risk data aggregation into the risk management function. This principle also stipulates that risk data aggregation should be considered in any new initiatives, including acquisitions and divestitures, IT change initiatives, and new product development.

Why other options are incorrect:

• Choice A is incorrect: While risk data aggregation and reporting practices are important, the Basel Committee's Principle 1 on Governance does not specifically state that these should be a crucial part of the bank's planning processes. This principle primarily focuses on the governance structure and responsibilities related to risk data management.

• Choice B is incorrect: The establishment of integrated data classifications and architecture across the banking group is not a specific recommendation under Principle 1 on Governance by the Basel Committee. This aspect pertains more to technical infrastructure rather than governance.

• Choice C is incorrect: While appointing individuals for data management responsibilities is important for implementation, this is not the specific focus of Principle 1 on Governance, which emphasizes the structural independence of risk data aggregation capabilities from the bank's group structure.