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

Bank Aldwych is drafting its CFP. Which of the following is the most important element to include so that the plan can actually be executed in a stress event?

A CFP is executable only if it has clear governance: defined roles, escalation procedures, decision authority and a crisis team. Without these, even good funding options may not be activated in time. Profit rankings, sole reliance on central bank support or one historical scenario do not make the plan workable.

  1. AA clear escalation framework with defined roles, decision-making authority and a crisis management teamCorrect
  2. BA list of the bank's most profitable business lines ranked by return on equity
  3. CA statement that the bank will rely on central bank facilities as the sole funding source
  4. DA single stress scenario based on the bank's historical worst day of deposit outflows

Explanation

An executable CFP needs clear governance: who declares a stress, who decides, and who communicates. Relying solely on central bank support is not a sound plan, a single historical scenario is too narrow, and profitability ranking does not address crisis execution.

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