Explanation:
The correct answer is D.
The statement that the risk appetite and tolerance statement for operational risk should be approved and periodically reviewed by senior management is incorrect. According to the Basel Committee's Principles for the Sound Management of Operational Risk, it is the responsibility of the board of directors to approve and periodically review the risk appetite and tolerance statement, while senior management's role is to implement the framework consistently throughout the organization.
Choice A is incorrect (meaning it is a correct statement) because assigning risk owners to each risk type and control owners to controls is a sound operational risk management practice that ensures clear accountability.
Choice B is incorrect (meaning it is a correct statement) because a firm's risk appetite must align with its strategic objectives and overarching risk management strategy to be effective.
Choice C is incorrect (meaning it is a correct statement) because setting maximum impact tolerances for critical business services is a foundational requirement for demonstrating operational resilience and tolerance for disruptions.
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Q.5062 Mr. Ibrahim Rashid is a lecturer at Oxford University. In one of his lectures on risk appetite and tolerance, Rashid states several points regarding risk appetite and risk tolerance. Which of the following statements made by Rashid is incorrect?
A
As a good practice of risk appetite, a risk owner should be assigned to each risk type; control owners to design, implement, and evaluate controls
B
Risk appetite should be consistent with the firm's objectives and the firm's risk management strategy
C
To demonstrate their risk appetite and tolerance for disruptions, firms must set maximum impact tolerances for critical business services
D
Risk appetite and tolerance statement for operational risk to be approved and periodically reviewed by senior management
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