FRM Part II · FRM Exam Part II · Introduction to Operational Risk and Resilience
A bank's board is reviewing its operational resilience approach. Management proposes the following: (1) map people, processes, technology, facilities and third parties supporting each critical operation; (2) test using severe but plausible scenarios; (3) set tolerances for disruption; (4) leave accountability with the operational risk team alone. Which element is inconsistent with sound operational resilience principles?
Accountability cannot rest with the operational risk team alone. The board and senior management must approve and oversee the resilience approach, with business lines owning delivery. Dependency mapping, severe but plausible scenario testing and setting tolerances for disruption are all consistent with sound principles.
- AMapping the dependencies of critical operations
- BTesting with severe but plausible scenarios
- CLeaving accountability with the operational risk team alone, rather than board and senior management oversightCorrect
- DSetting tolerances for disruption
Explanation
Sound practice places responsibility for approving and overseeing the resilience approach with the board and senior management, with business lines owning delivery. Delegating accountability solely to the second-line risk function weakens governance and independence. Dependency mapping, severe but plausible scenario testing and tolerances are all standard components.
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