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FRM Part II · FRM Exam Part II · Contingency Funding Planning

A bank's board reviews its CFP after an internal audit. Findings: (i) the plan was last tested in a tabletop exercise three years ago; (ii) the contact list includes staff who have left; (iii) the crisis team chair is the head of treasury, who also approves the funding sources used. Which recommendation most directly strengthens governance while addressing the independence concern in (iii)?

Assign oversight to an independent senior risk or ALCO-level body, require regular testing and updating of the plan, and keep treasury as the executing function. This separates execution from challenge, fixes the stale testing and contact issues, and keeps accountability clear.

  1. AReplace the tabletop exercise with a purely quantitative stress model
  2. BAssign the CFP oversight to an independent senior risk or ALCO-level body, require regular testing and updates, and keep treasury as the executing functionCorrect
  3. CRemove the contact list from the plan to avoid it becoming outdated
  4. DGive the head of treasury sole authority to ensure speed of action

Explanation

Good governance separates execution (treasury) from oversight and challenge (ALCO, risk or board committees), and requires regular testing and maintenance of the plan, including contacts. Removing the contact list loses a key operational tool, sole authority worsens the conflict, and a model alone cannot replace operational rehearsal.

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