Financial Risk Manager Part 1

Explanation

Option B is correct because it accurately captures the fundamental difference between ERM and silo-based risk management:

Enterprise Risk Management (ERM):

• Takes a holistic, integrated approach to risk management
• Views risks across the entire organization as interconnected
• Manages all types of risks (strategic, operational, financial, compliance) together
• Considers risk correlations and interdependencies

Silo-based Risk Management:

• Manages risks within individual business units or departments
• Treats risks in isolation without considering cross-functional impacts
• May lead to suboptimal risk management decisions due to lack of coordination
• Can result in risk concentration or missed opportunities for risk diversification

Option A is incorrect because ERM does not focus primarily on operational risks - it covers all risk types comprehensively. Option C is incorrect because ERM's broad focus typically reduces, not increases, overall risk exposure through better coordination and diversification benefits.