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FRM Part II · FRM Exam Part II · Guidance on Managing Outsourcing Risk

A bank tests the business continuity plan for an outsourced customer call centre. Which test most directly demonstrates that the bank can sustain the service if the vendor's primary site becomes unavailable?

A joint failover test with the vendor, measuring actual recovery time against the agreed objective, is best. It gives real evidence that the service can continue, whereas contract clauses, emails or price comparisons only assert capability without demonstrating it.

  1. AA joint test with the vendor that actually fails over to the backup site and measures recovery time against the agreed objectiveCorrect
  2. BReviewing the vendor's signed contract for a continuity clause
  3. CAsking the vendor to confirm by email that a plan exists
  4. DComparing the vendor's price to competitors

Explanation

Guidance expects banks to confirm that vendor continuity arrangements are tested and consistent with the bank's own recovery objectives. A joint failover test produces evidence of actual recovery time. A clause, an email or a price comparison gives no evidence of capability.

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