FRM Part II · FRM Exam Part II · Digital Resilience and Financial Stability: The Quest for Policy Tools in the Financial Sector
A bank defines an impact tolerance for its payments service: the maximum tolerable disruption is 4 hours. A scenario test shows the service is restored after 6 hours. Which conclusion and response is most consistent with a digital resilience framework built on impact tolerances?
The test shows a breach of the 4-hour impact tolerance, so the bank should find the vulnerabilities and invest to restore the service within 4 hours. Loosening the tolerance to pass would defeat its purpose, and simulated scenarios are precisely how such gaps are meant to be discovered.
- ANo action is needed because impact tolerances apply only to capital ratios
- BThe result shows a breach of tolerance, so the bank should identify vulnerabilities and invest to bring recovery within 4 hoursCorrect
- CThe bank should raise its tolerance to 6 hours so the test passes
- DThe bank should treat the test as irrelevant because it was a simulation rather than an actual event
Explanation
An impact tolerance is a threshold the firm should be able to remain within in a severe but plausible scenario. Recovery in 6 hours exceeds the 4-hour limit, so the firm should remediate the weaknesses found. Raising the tolerance just to pass defeats the purpose, and scenario tests exist to reveal such gaps.
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