Banking · Risk Governance and Tone at the Top
Within a robust risk governance framework, which of the following practices most effectively ensures that the 'tone at the top' translates into appropriate risk-taking behavior at the business unit level?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Implementing a compensation structure that rewards high short-term profit regardless of the risk profile.
- 2Centralizing all decision-making power in the hands of the Chief Risk Officer to bypass middle management.
- 3Integrating risk-based performance metrics and ethical conduct standards into the appraisal and incentive systems for all employees.✓
- 4Relying exclusively on external auditors to identify and report internal policy violations to the board.
Correct answer
Integrating risk-based performance metrics and ethical conduct standards into the appraisal and incentive systems for all employees.
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