medium · FRM Part 2 Operational Risk
A bank defines 'Impact Tolerance' for its clearing service as 'the inability to process more than $50 bn in payments in a single day.' During a simulation, a system failure occurs at 10:00 AM. By 2:00 PM, the backlogged payments total $40 bn. The RTO for the system is 5 hours.
What is the status of the bank's resilience?
- The bank is fully resilient because its 5-hour RTO for the affected system is comfortably shorter than the full 24-hour business day.
- The bank is in breach of its RTO, but potentially still within its impact tolerance if the system is restored before the $50 bn limit is hit.
- The bank should immediately trigger its NSFR recovery plan to source additional short-term liquidity for the growing backlog of unpaid settlements.
- The bank is already in clear breach of its impact tolerance because the $40 bn backlog amount is dangerously close to the $50 bn regulatory limit.
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