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Answer: It will help the bank optimize its allocation of resources to its most important business services.
An impact tolerance is a measure that quantifies the level of disruption a firm can tolerate in the event of a severe but plausible incident. By establishing an impact tolerance, a bank can identify its most critical operational processes and then allocate its resources accordingly with the aim of staying within the set impact tolerance range. This approach helps the bank to prioritize its resources towards its most important business services, ensuring that it can maintain operations within acceptable limits even in the face of disruptions. The correct answer is C, as it directly relates to the benefit of optimizing resource allocation based on the impact tolerance set for the bank's operational processes.
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In the context of financial risk management, specifically concerning operational resilience, what potential advantage does a bank gain by establishing an impact tolerance?
A
It will enhance the bank's ability to identify and limit concentration risk.
B
It will accurately estimate the severity of a potential disruption to an operational process and the amount of downtime that would result.
C
It will help the bank optimize its allocation of resources to its most important business services.
D
It will prevent failures of critical operational processes and the systems that support these processes.