Answer: Require business unit managers to challenge the assumptions for their unit's capital model before providing final approval.

## Explanation **Option A** is the correct recommendation because: - It addresses governance framework deficiencies by involving business unit managers in the capital modeling process - Having managers challenge assumptions before approval ensures proper oversight and validation - This aligns with best practices for economic capital governance where business units should understand and validate the models used for their operations - It promotes accountability and transparency in the capital allocation process **Option B** is incorrect because: - Simply summing exposures across different risk types ignores diversification effects and correlations between risks - Economic capital should account for diversification benefits across the organization - This approach would likely overestimate the bank's true economic capital needs - Best practices in economic capital modeling involve using more sophisticated approaches that consider risk interdependencies In summary, requiring business unit managers to challenge model assumptions enhances governance and ensures proper validation, while simple summation of exposures fails to account for diversification and represents poor modeling practice.

Author: LeetQuiz .