Which statement best describes the board's role in risk governance?

Which statement best describes the board's role in risk governance?

• A. Establish risk appetite
• B. Set daily transaction limits
• C. Approve member loans
• D. Audit front-line operations

Answer: (A)

The key idea is that the board shapes how much risk the organization is willing to accept and sets the framework for managing it. Establishing risk appetite defines the boundaries for all risk-taking and guides how management identifies, measures, monitors, and reports risks. By approving the risk policy, governance structure, and oversight processes, the board ensures there are clear controls, adequate resources, and monitoring in place to keep risk within those boundaries and aligned with strategic goals. Operations like daily transaction limits and individual loan approvals are carried out by management and specific control functions within those established boundaries. Auditing front-line operations is the job of internal or external audit to provide independent assurance, not the board to perform day-to-day audits.

The key idea is that the board shapes how much risk the organization is willing to accept and sets the framework for managing it. Establishing risk appetite defines the boundaries for all risk-taking and guides how management identifies, measures, monitors, and reports risks. By approving the risk policy, governance structure, and oversight processes, the board ensures there are clear controls, adequate resources, and monitoring in place to keep risk within those boundaries and aligned with strategic goals.

Operations like daily transaction limits and individual loan approvals are carried out by management and specific control functions within those established boundaries. Auditing front-line operations is the job of internal or external audit to provide independent assurance, not the board to perform day-to-day audits.