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FRM Part II · FRM Exam Part II · Introduction to Operational Risk and Resilience

A bank defines its critical operations and sets a tolerance for disruption for each. Which description best fits a tolerance for disruption?

A tolerance for disruption is the level of disruption to a critical operation, for example maximum outage duration or data loss, that a bank is willing to accept under severe but plausible scenarios. It focuses on service impact, not financial loss appetite.

  1. AThe maximum amount of operational loss the bank can book in a year
  2. BThe level of disruption to a critical operation, such as maximum outage duration or data loss, that the bank is prepared to accept under severe but plausible scenariosCorrect
  3. CThe average time between two incidents affecting the same system
  4. DThe insurance deductible applied to business interruption claims

Explanation

Tolerance for disruption is expressed in terms of impact on the critical operation, such as maximum tolerable outage time or volume affected, and is tested against severe but plausible scenarios. It is not a loss budget or insurance term, so the loss-based and deductible options are wrong.

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