Explanation:
Independent background checks must be carried out for each manager irrespective of the mode of hiring. This is a crucial step in the hiring process, especially for positions that involve significant responsibility and risk, such as a risk manager. Background checks help to verify the credentials, experience, and track record of the candidate, ensuring that they are suitable for the role. In the context of the investment management firm, the risk manager is responsible for managing a global equity portfolio, a role that requires a high level of expertise and integrity. By bypassing background checks, the firm may be exposing itself to potential risks, such as hiring a manager who is not qualified or has a history of fraudulent activities. Therefore, it is essential that independent background checks are carried out for each manager, regardless of how they are hired.
Choice A is incorrect. Hiring managers through an internal referral programme does not necessarily reduce the risk of employee frauds. While it may increase the likelihood of hiring individuals who are known and trusted by current employees, it does not guarantee that these individuals will not engage in fraudulent activities. Without a thorough background check, there is still a risk of hiring individuals with a history of fraudulent behavior.
Choice B is incorrect. While hiring managers through an internal referral programme may reduce the cost incurred when conducting background checks, this practice can potentially lead to greater risks and costs in the long run if it results in hiring unqualified or dishonest individuals.
Choice D is incorrect. The statement that managers must not be hired through an internal referral programmes as it reduces the number of potential candidates is too absolute. Internal referrals can be one method among many for sourcing potential candidates, but should not replace other methods such as job postings or recruitment agencies which can provide a wider pool of candidates.
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Q.2598 An investment management firm is looking for a fund manager and a risk manager. The firm also has an employee referral programme through which present employees may refer probable candidates for various roles. In fact, the firm has a track record of hiring managers based on internal employee recommendations. An employee recruited via an internal recommendation is neither subject to background checks nor rigorous pre-employment interviews.
The firm hires a risk manager through the internal referral programme. The risk manager is put in a team-mandated with the management of a global equity portfolio. The managers report to the head of the global equity portfolio. The risk manager observes that the firm does not have a risk committee, but the CIO does receive daily reports on various risk metrics. He also observes that the model used to value exotic derivative products was last audited two years ago. Which of the following is the most accurate statement?
A
Hiring managers through an internal referral programmes reduces the risk of employee frauds.
B
Hiring managers through an internal referral programme reduces the cost incurred when conducting background checks.
C
Independent background checks must be carried out for each manager irrespective of the mode of hiring.
D
Managers must not be hired through an internal referral programmes as it reduces the number of potential candidates.