Which is a main element of the risk management practice?

Question

Options

• AAdoption of the champion-challenger' model
• BIntroduction of a summary investment appraisal template
• CPreparation of a Portfolio Management Framework
• DImplementation of an effective escalation path to the relevant portfolio governance body

• B
  3% (1)
• C
  6% (2)
• D
  91% (29)

Explanation

Implementation of an effective escalation path (D) is correct because risk management fundamentally requires that identified risks - especially those exceeding defined thresholds - can be elevated to the appropriate decision-making authority. Without a clear escalation path to a portfolio governance body, risks may be mishandled or ignored at lower levels, undermining the entire practice.

• A (champion-challenger model) is a technique used in decision-making or model validation (common in banking/analytics), not a core element of risk management practice.
• B (investment appraisal template) belongs to portfolio or financial management - it assesses the value of investments, not risks.
• C (Portfolio Management Framework) is a governance and delivery tool that sits above risk management; it may contain risk management components but is not itself an element of the practice.

Memory tip: Think of risk management as a chain of accountability - risks must flow upward to the right people. "Escalation path → governance body" = someone in authority must always be reachable when a risk exceeds what the current level can handle.

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