Skip to content

FRM Part II · FRM Exam Part II · Risk Identification

A bank's operational risk stress test asks how a prolonged cloud provider outage would affect critical services. Which design feature best makes this a stress test rather than a routine business-as-usual loss forecast?

A stress test uses severe but plausible assumptions, such as an outage lasting beyond impact tolerance and failure of the main recovery option. This tests resilience under adverse conditions, unlike a baseline forecast built on average past incidents or narrow scope that ignores critical services and third-party dependencies.

  1. AIt assumes the outage lasts as long as the average past incident
  2. BIt applies severe but plausible assumptions, such as outage duration beyond tolerance and failure of the primary recovery optionCorrect
  3. CIt is run only on non-critical business services
  4. DIt excludes dependencies on third parties to keep the scope narrow

Explanation

Stress tests deliberately push assumptions to severe but plausible levels, such as exceeding impact tolerances and failing recovery arrangements. Average-incident assumptions are baseline, and excluding critical services or third-party dependencies defeats the purpose.

Did you get it right without looking?

One question tells you little. A timed set on Risk Identification shows your real accuracy, how long you take and where you lose marks.

Practise Risk IdentificationFree diagnostic mock

More Risk Identification questions