Financial Risk Manager Part 1
Get started today
Ultimate access to all questions.
Q.5324 Vista Technologies, a global software company, is struggling with establishing a strong risk culture within the organization. The company's new Chief Risk Officer (CRO), Lisa, faces several hurdles as she tries to navigate this issue. One of the challenges that Lisa mentions to the executive board is the 'curse of data.' Which of the following scenarios best exemplifies Lisa's concern?
Other
Community
TTanishq
A
The excessive data generated by various business lines may lead to confusion and difficulty in identifying genuine risk indicators.
B
There maybe a lack of data due to insufficient technological infrastructure, making it challenging to identify risk trends.
C
Data privacy laws may prevent the company from fully utilizing the available data for risk assessment.
D
The inconsistency in the data formats received from different business lines may bring about delays in risk assessment.
Explanation:
Explanation
In today's digital age, organizations often have access to vast amounts of data generated by their various business lines. This data can include everything from financial metrics, customer behaviour, operational performance to external data such as market trends, economic indicators, and regulatory updates. While this data can potentially provide invaluable insights for risk management, it can also become overwhelming and counterproductive – a situation referred to as the 'curse of data'.
Why A is correct:
- The 'curse of data' specifically refers to the problem of having too much data, which can lead to:
- Information overload and confusion
- Difficulty distinguishing between relevant and irrelevant information
- Challenges in identifying genuine risk indicators amid the noise
- Analysis paralysis where decision-making is hindered by excessive data
Why other options are incorrect:
- B: This describes a data scarcity problem, not the 'curse of data' which is about data abundance
- C: This relates to legal/compliance constraints on data usage, not the core issue of data overload
- D: This addresses data quality and integration issues, which are separate from the fundamental problem of having too much data
The 'curse of data' phenomenon is particularly relevant in risk management where the ability to filter signal from noise is crucial for effective decision-making.
Comments
Loading comments...