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Answer: Identify important business services and map the dependencies between these services.
B is correct. One of the steps in developing an operational resilience framework is to identify the firm's important business services, which for this firm would likely include the bill payment services and the international currency payment services. These important business services should all be customer-facing services. Once the important business services are identified, the firm must next map the dependencies between the services to identify potential vulnerabilities or areas where a disruption in one important business service can affect others. A is incorrect because an impact tolerance should be developed for important business services. There are many internal processes that are not customer-facing (such as payroll, human resources, and office supplies procurement) so regulators do not require impact tolerances to be developed for these. C is incorrect as regulatory expectations for operational resilience do not include the provision of additional capital. Also, current Basel regulatory guidelines for operational risk no longer include an approach that requires the calculation of a 99.9% VaR, this approach (the Advanced Measurement Approach) was phased out. D is incorrect because operational resilience should be a multi-disciplinary approach. The resilience team is usually coordinated by the operational risk management function and includes representatives from functions such as business continuity management, human resources, third-party risk management, IT, infrastructure, and operations. Legal and compliance functions, while important, do not have as much of the relevant operational or process-related expertise that is important in a resilience context.
Author: LeetQuiz Editorial Team
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A rapidly growing financial technology firm based in the UK offers various services, including savings accounts, cryptocurrency accounts, domestic bill payment services, and multi-currency payment options. The company is currently focusing on developing a strategy to comply with the newly introduced UK regulatory requirements for operational resilience. A senior operations manager is tasked with formulating this strategy. Which of the following actions should the manager recommend for the company to most effectively satisfy the regulatory standards for operational resilience?
A
Develop an impact tolerance for each of the internal processes performed by the firm.
B
Identify important business services and map the dependencies between these services.
C
Calculate the 1-year 99.9% VaR for operational risk for each of the firm's business divisions and use this result to reserve additional capital for each division.
D
Create an operational resilience team that is led by the IT department, with its other members coming from the operational risk management, legal, and compliance functions.