FRM Part II · FRM Exam Part II · Introduction to Operational Risk and Resilience
A bank's board is reviewing its operational resilience approach. Which statement best reflects the core objective of operational resilience as distinct from traditional operational risk management?
Operational resilience aims to keep critical operations running within agreed impact tolerances during disruption, assuming that disruptions will happen. It differs from traditional risk management, which emphasizes preventing losses and holding capital, because it focuses on continuity, recovery and delivery of services.
- AEliminating all operational losses through stronger preventive controls
- BEnsuring critical operations can be delivered through disruption within agreed tolerances, assuming disruptions will occurCorrect
- CMaximizing the regulatory capital held against operational risk
- DTransferring all disruption risk to insurers and third-party providers
Explanation
Operational resilience accepts that disruptions will occur and focuses on the ability to continue delivering critical operations within defined tolerances. Preventing every loss is unrealistic and is the traditional prevention-centric view. Capital and insurance are supporting tools, not the objective.
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