easy · FRM Part 2 Operational Risk
A regulator assesses a bank's 'Digital Concentration.' They find that 80% of the bank's Tier-1 models are provided by a single software vendor.
What is the most likely systemic concern?
- The models will become too operationally diverse and fragmented for a single board risk committee to govern.
- A single defect or vulnerability in the vendor's software could cause a synchronized failure across multiple risk functions.
- The bank is violating DORA requirements by relying on automated software instead of manual back-office control processes.
- The bank will end up holding too much excess regulatory capital headroom relative to its actual measured risk exposure profile.
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