Governance (FRM Part 2 – Book 2 – Credit Risk Measurement and Management – Ch 2)
Ace FRM Part 2 (Book 2 – Credit Risk Measurement & Management, Ch. 2: Governance). Jim walks through the CEO’s risk-management responsibility, the three lines of defense, credit-risk processes (origination → assessment → approval), delegation frameworks, internal/external audit, limits & risk appetite, exposure/tenor, credit committees, and exam-style takeaways.
Perfect for GARP FRM candidates seeking clear definitions + governance best practices.
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After completing this reading, you should be able to:
Define credit risk and explain how it arises using examples.
Explain the distinctions between insolvency, default, and bankruptcy.
Identify and describe transactions that generate credit risk.
Describe the entities that are exposed to credit risk and explain circumstances under which exposure occurs.
Discuss the motivations for managing or taking on credit risk.
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