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FRM Part II · FRM Exam Part II · Digital Resilience and Financial Stability: The Quest for Policy Tools in the Financial Sector

A bank adopts a multi-cloud strategy hosting the same critical service across two providers. Which residual risk should its risk manager still monitor most closely?

The risk manager should watch for hidden common dependencies such as shared software, networks or sub-contractors across the providers. These fourth-party links can recreate concentration risk despite using multiple clouds, and diversification neither removes operational risk nor the need for resilience testing.

  1. AHidden common dependencies, such as shared underlying software, network or sub-contractors, that reintroduce concentrationCorrect
  2. BElimination of all operational risk because providers are diversified
  3. CThe loss of any need for incident response testing
  4. DGuaranteed lower costs than a single provider

Explanation

Multi-cloud reduces direct reliance on one provider but fourth-party and shared technology dependencies can still create a common point of failure. It does not remove operational risk, testing needs, or guarantee lower costs, and added complexity can create new risks.

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