Skip to content

FRM Part II · FRM Exam Part II · Liquidity Risk

In a contingency funding plan (CFP), which element is most important for ensuring the plan can actually be executed during a crisis?

The key element is a plan with clear escalation triggers, assigned roles and responsibilities, and funding sources whose access has been tested in advance. Without these, the plan cannot be executed quickly under stress, regardless of how much historical analysis or asset listing it contains.

  1. AClear escalation triggers, defined roles and responsibilities, and pre-tested access to funding sourcesCorrect
  2. BA long narrative of the bank's historical funding performance
  3. CA commitment to rely exclusively on central bank facilities
  4. DA list of assets with no indication of how quickly they can be monetised

Explanation

A CFP must be actionable: early warning indicators tied to escalation, named owners, communication plans, and funding sources that have been operationally tested. History alone, sole reliance on the central bank, or untested asset lists do not make the plan executable.

Did you get it right without looking?

One question tells you little. A timed set on Liquidity Risk shows your real accuracy, how long you take and where you lose marks.

Practise Liquidity RiskFree diagnostic mock

More Liquidity Risk questions