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FRM Part II · FRM Exam Part II · Guidance on Managing Outsourcing Risk

A bank's outsourcing SLA requires 99.9% availability of a hosted trading-support platform over a 30-day month (720 hours). The provider's monthly report shows 2.5 hours of total unplanned downtime. Which conclusion should the bank's oversight function reach?

The SLA was breached. Availability was (720 − 2.5)/720, about 99.65%, which is below the required 99.9%. A 99.9% target permits only about 0.72 hours of downtime in the month, so 2.5 hours exceeds it and should be escalated.

  1. AThe SLA was met, since availability was about 99.65%, above 99.5%
  2. BThe SLA was breached, since availability was about 99.65%, below 99.9%Correct
  3. CThe SLA was breached, since availability was about 97.5%
  4. DThe SLA was met, since availability was about 99.97%

Explanation

Availability = (720 - 2.5)/720 = 717.5/720 = 99.65%. The SLA threshold is 99.9%, which allows only 0.72 hours of downtime. The breach should be escalated and may trigger remedies. Option 4 divides the wrong way, and option 3 uses 2.5% as the downtime.

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