Answer: Senior management ignored the breaching of risk limits.

## Explanation The correct answer is **C** - Senior management ignored the breaching of risk limits. ### Context of the J.P. Morgan Chase 'London Whale' Case: - In 2012, J.P. Morgan Chase lost over $6.2 billion from exposure to a massive credit derivatives portfolio - The case revealed a culture of inadequate regulatory oversight - Risk limits were consistently breached - Risk metrics were disregarded - Risk models were manipulated ### Why Option C is Correct: Despite these glaring issues with risk limit breaches, the management did not take any substantial steps to rectify these anomalies. This lack of action on the part of management is a clear manifestation of ignoring the breaching of risk limits. ### Additional Context: - The Chief Investment Office (CIO), which was not a client-facing unit of the bank, was not subject to the same level of regulatory scrutiny as other portfolios - This further contributed to the lack of adequate management oversight ### Why Other Options are Incorrect: - **Option A**: While senior managers receiving daily risk reports but not reading them would demonstrate lack of oversight, this was not the specific issue in this case - **Option B**: The absence of a risk committee could indicate insufficient oversight, but this was not the primary issue - **Option D**: This was not specifically mentioned as the key manifestation of management oversight failure ### Key Risk Management Lesson: This case highlights the critical importance of management actively monitoring and enforcing risk limits, rather than passively receiving reports without taking action when limits are breached.

Author: Tanishq Prabhu