easy · FRM Part 2 Operational Risk
A Tier-1 bank conducts a 'fourth-party' risk assessment and discovers that all three of its diverse cloud providers (A, B, and C) utilize the same specialized hardware security module (HSM) vendor for cryptographic key storage. This scenario represents:
- A violation of the shared responsibility model's data integrity requirement under contract.
- A systemic single point of failure through unmanaged sub-outsourcing (fourth-party concentration).
- Diversification of operational risk achieved through use of industry-standard security hardware.
- Exogenous liquidity risk resulting from increased margin requirements on the hardware collateral pool.
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