medium · FRM Part 2 Operational Risk
A bank's Risk Appetite Framework (RAF) defines a 'Zero Tolerance' zone for Sanctions breaches. On a 5 × 5 RCSA heat map, a business unit maps a Sanctions risk with an inherent score of 25 (Likelihood 5, Impact 5). They propose a residual score of 5 (Likelihood 1, Impact 5) based on a new automated screening tool.
What is the critical governance requirement for this mapping?
- The risk should be removed entirely from the RCSA because the mitigating control is now fully automated end to end.
- The unit can self-approve the green residual status if the screening tool's vendor supplies a formal certification letter.
- The residual risk must be formally accepted at the highest level of authority or remediated immediately if above appetite.
- The impact score should be lowered to 1 because the automated tool physically prevents the sanctioned payment from ever being sent.
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