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FRM Part II · FRM Exam Part II · Case Study: Third-party Risk Management

A bank is drafting a contract with a vendor supporting a critical payments function. Which provision most directly supports the termination and exit stage of the lifecycle?

A clause requiring transition assistance and the return or secure destruction of bank data on termination best supports the exit stage. It lets the bank move the critical function without disruption or data exposure, whereas audit rights, service levels and insurance mainly serve the ongoing monitoring stage.

  1. AA clause granting the bank the right to audit the vendor annually
  2. BA clause requiring the vendor to provide transition assistance and return or securely destroy bank data on terminationCorrect
  3. CA clause setting service-level targets for uptime
  4. DA clause requiring the vendor to hold cyber insurance

Explanation

Exit provisions cover transition support and data return or destruction so the bank can move services in-house or to another vendor. Audit rights, SLAs and insurance support monitoring and risk transfer during the relationship, not the exit itself.

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