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

During a stress event, a bank's CFP activates a crisis management team (CMT). Which feature best reflects good practice for the design of this team?

Good practice is a predefined cross-functional crisis management team including treasury, risk, finance, business lines, legal and communications, with clear decision rights, escalation triggers and a designated chair. This ensures fast, coordinated action, whereas treasury-only, ad hoc or external-only teams lack breadth or authority.

  1. AMembership limited to treasury staff to keep decisions fast and confidential
  2. BCross-functional membership (treasury, risk, finance, business lines, legal, communications) with clear decision rights, escalation triggers and a designated chairCorrect
  3. CMembership to be decided by the CEO only after a crisis is declared
  4. DMembership consisting solely of external consultants to ensure objectivity

Explanation

Effective CFPs predefine a cross-functional team with clear roles, authority, and escalation links so action is not delayed. Limiting to treasury omits key perspectives such as communications and legal. Deciding membership ad hoc wastes time, and external-only teams lack authority and institutional knowledge.

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