FRM Part II · FRM Exam Part II · Contingency Funding Planning
Which statement best describes the role of the board of directors in contingency funding planning?
The board sets liquidity risk tolerance, approves the contingency funding plan, and ensures senior management has the resources and authority to implement it. Daily execution, asset selection and cash flow forecasting are delegated to management and treasury, not performed by the board.
- AExecuting daily funding transactions during a stress event
- BSetting liquidity risk tolerance and approving the CFP, while ensuring senior management has the resources and authority to implement itCorrect
- CSelecting individual securities to be sold in a liquidity crisis
- DPreparing the detailed cash flow forecasts used in the plan
Explanation
The board sets the risk tolerance and approves key liquidity policies including the CFP, with senior management responsible for implementation and treasury for daily execution. Transaction execution, selecting securities and forecasting are management-level tasks.
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