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FRM Part II · FRM Exam Part II · Digital Resilience and Financial Stability: The Quest for Policy Tools in the Financial Sector

An asset manager considers a multi-cloud strategy, using two providers for its order management system, to reduce concentration risk. Which residual risk is most likely to remain or even increase?

Added operational complexity and shared upstream dependencies remain. Using two clouds lowers reliance on one provider, but integration burdens, misconfiguration risk and common underlying software or network layers can still produce correlated failures, so diversification does not fully eliminate concentration risk.

  1. AElimination of all provider-specific outages through diversification alone
  2. BReduced need for exit planning because the providers back each other up
  3. CAdded operational complexity and shared upstream dependencies, such as a common software or network layer, that can still cause correlated failureCorrect
  4. DLower exposure to cyber attacks because attack surfaces are halved

Explanation

Multi-cloud can reduce single-provider dependence but adds integration complexity, skills needs and misconfiguration risk, and providers may share common upstream components, so failures can remain correlated. Exit planning is still needed and attack surface typically grows.

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