The correct answer is B.

The risk committee is a specialized group within the board of directors that is specifically authorized to monitor the effectiveness of the firm’s risk management framework. This committee is typically composed of members who have a deep understanding of the various risks that the firm might face, including operational, financial, and strategic risks. The risk committee’s primary role is to ensure that the firm has robust risk management policies and procedures in place and that these are being effectively implemented. The committee also reviews and assesses the firm’s risk profile and risk appetite, and ensures that the firm’s risk management activities align with its strategic objectives. The risk committee plays a crucial role in promoting a strong risk culture within the firm, and in ensuring that risk considerations are integrated into decision-making processes at all levels of the firm.

Choice A is incorrect. The audit committee is primarily responsible for overseeing the integrity of the company’s financial statements, internal controls over financial reporting, and the performance of internal and external audits. While they may review risk management policies and procedures as part of their duties, they are not specifically authorized to oversee and evaluate the effectiveness of the firm’s risk management framework.

Choice C is incorrect. The executive committee typically handles a range of issues including strategic planning, resource allocation, and operational decisions. Although they might be involved in discussions about risk management strategies or initiatives, their primary role does not include overseeing or evaluating the effectiveness of these frameworks.

Choice D is incorrect. Business line managers are responsible for managing risks within their specific business units or departments but do not have a firm-wide oversight role in evaluating the effectiveness of overall risk management framework.

Things to Remember

• The risk committee is a specialized group within the board of directors specifically authorized to monitor the effectiveness of the firm’s risk management framework.
• The audit committee is responsible for overseeing the integrity of the company’s financial statements and internal controls over financial reporting.
• The executive committee handles strategic planning, resource allocation, and operational decisions.