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Answer: The completeness principle recommends that a financial institution should capture data on its entire universe of material risk exposures.
The completeness principle recommends that a bank be able to capture and aggregate all data on the material risks to which it is exposed across the organization. This will allow it to identify and report risk exposures, concentrations, and set exposure limits. **Key Points:** - **Completeness Principle**: Requires banks to capture data across their entire universe of material risk exposures - **Purpose**: Enables identification of risk exposures, concentrations, and setting of exposure limits - **Basel Committee Framework**: Part of 14 principles for effective risk data aggregation and risk reporting - **Distinction from Other Principles**: - Integrity principle focuses on data quality and reliability, not complete automation - Adaptability principle addresses system flexibility to meet changing needs - Accuracy principle ensures data is correct and reliable through validation processes **Reference**: Global Association of Risk Professionals. Foundations of Risk Management. New York, NY: Pearson, 2019. Chapter 7. Principles for Effective Data Aggregation and Risk Reporting.
Author: LeetQuiz Editorial Team
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In characterizing various dimensions of a bank's data, the Basel Committee has suggested several principles to promote strong and effective risk data aggregation capabilities. Which statement correctly describes a recommendation that a bank should follow in accordance with the Basel Committee's principles for effective risk data aggregation and risk reporting?
A
The integrity principle recommends that data aggregation should be completely automated without any manual intervention.
B
The completeness principle recommends that a financial institution should capture data on its entire universe of material risk exposures.
C
The adaptability principle recommends that a bank should frequently update its risk reporting systems to incorporate changes in best practices.
D
The accuracy principle recommends that the risk data be reconciled with management's estimates of risk exposure prior to aggregation.
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