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

A bank's CFP names an internal committee to approve use of contingent funding sources in a crisis. A review finds that (1) the plan lists central bank facility contacts but not the collateral already pre-positioned, (2) decision-makers' phone numbers were last updated two years ago, and (3) the plan has never been tested through a simulation. Which single remediation would most directly address the combined risk that the plan cannot be executed when needed?

Regular documented crisis simulations, used to refresh contact lists, collateral inventories and procedures and reported to the board, best address all three gaps. They test and maintain operational readiness, whereas raising more unsecured funding, listing fewer sources or outsourcing ownership leaves the plan unexecutable or less accountable.

  1. AIncrease the amount of unsecured term funding raised
  2. BConduct periodic, documented crisis simulations and use them to update contact lists, collateral inventories and procedures, reporting results to the boardCorrect
  3. CReduce the number of contingent funding sources listed in the plan
  4. DMove the plan's ownership from management to external advisers

Explanation

All three gaps are operational readiness failures: stale data, missing collateral information and no testing. Regular simulations expose and correct these and the board review ensures accountability. More unsecured funding does not fix executability, fewer sources reduces resilience, and outsourcing ownership weakens accountability.

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