C5.1 Risk data discipline

BCBS 239 [17]

The first Monitor component requires that every number reaching a risk report have five properties that can be tested: accuracy, meaning reconciled to a source of record; completeness across entities, books and risk types; timeliness, including in a crisis; adaptability, meaning the same data can answer a question nobody wrote a report for; and lineage, meaning the number has a source, a transformation and an owner, and the chain can be walked backward. The source is the set of data-aggregation principles written for large banks after 2008 [17], when institutions that had reported risk to their boards for years could not say, within a week, what their exposure to one failing counterparty was.

What the component reconciles is a register with a capital ratio. The principles were written for the second, and the framework applies them to the first, because a register in most organizations is a spreadsheet, or several, and the figures in a board paper are typed from them. The result is not fraud but drift: the same risk carries three exposures in three documents and the board does not know which it is looking at. Lineage is the property that stops the drift, and the framework writes it into the indicator object as a field for that reason. An auditor tests the component by picking a number on the board page and asking for the chain; the time it takes to produce is the measure.