Skip to content

FRM Part II · FRM Exam Part II · Risk Mitigation

A bank outsources its payment processing to a single provider. Risk management is concerned that a failure of the provider would halt payments for several days. Which mitigation most directly addresses this concentration and continuity risk?

A tested exit and contingency plan, with an alternative provider or in-house fallback, best addresses dependence on a single payment processor. It lets the bank keep critical services running if the vendor fails, whereas self-assessments or higher fees do not provide a real substitute.

  1. AAdding a clause that lets the bank publish the vendor's performance results
  2. BDeveloping a tested exit and contingency plan, including an alternative provider or ability to bring the service in-houseCorrect
  3. CIncreasing the vendor's contractual fees to fund its resilience investment
  4. DRelying on the vendor's annual self-assessment of its business continuity plan

Explanation

Concentration and continuity risk is mitigated by credible, tested exit strategies and substitutability, such as an alternative provider or in-house capability. A vendor self-assessment gives no independent assurance, and higher fees do not ensure resilience or provide an alternative if the vendor fails.

Did you get it right without looking?

One question tells you little. A timed set on Risk Mitigation shows your real accuracy, how long you take and where you lose marks.

Practise Risk MitigationFree diagnostic mock

More Risk Mitigation questions