FRM Part II · FRM Exam Part II · Digital Resilience and Financial Stability: The Quest for Policy Tools in the Financial Sector
A bank's board asks why digital resilience is considered a financial stability issue rather than only a matter of individual firm risk management. Which explanation is most appropriate?
Digital resilience is a financial stability issue because cyber incidents can spread through interconnected institutions and shared infrastructure, disrupting critical functions like payments and eroding confidence. It is not confined to the attacked firm, and operational events, not just credit losses, can threaten stability.
- ACyber incidents can propagate across interconnected institutions and shared infrastructure, impairing critical functions such as payments and confidence in the systemCorrect
- BCyber incidents affect only the firm attacked and never spill over to others
- CFinancial stability concerns arise only from credit losses, not from operational events
- DDigital resilience matters only for institutions listed on stock exchanges
Explanation
Interconnections, common providers and shared infrastructure mean a severe incident can spread, disrupt payments and liquidity, and erode confidence, which makes it a systemic concern. Claiming incidents never spill over, or that only credit losses matter, contradicts this view. Listing status is irrelevant.
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