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

A mid-sized bank is drafting its contingency funding plan (CFP). Which feature best reflects sound governance of the plan?

The best governance feature is a board-approved plan with a named crisis management team, clear authority, escalation triggers and regular testing. Treasury-only ownership or post-event updates leave gaps in cross-functional coordination and readiness when stress actually arrives.

  1. AA named crisis management team with defined authority, escalation triggers and delegated decision rights, approved by the board and tested regularlyCorrect
  2. BOwnership by the treasury desk alone so that decisions are made quickly without committee involvement
  3. CA plan that lists only market-based funding sources because retail sources cannot be relied on in stress
  4. DA plan updated only after a funding event has occurred so that it reflects real lessons

Explanation

Sound CFP governance requires clear roles, authority, escalation triggers and board approval, with regular testing. Treasury-only ownership removes the cross-functional input (risk, finance, legal, communications) needed in a crisis. Updating only after an event is reactive and leaves the plan untested.

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