Operational resilience and effective governance – how prepared are you?

The words ‘operational resilience’ have taken on greater meaning recently with increased regulatory interest in this topic and, of course, the real-world experience of the COVID-19 pandemic. 

But how can investment management firms actually ensure their operations are resilient and best equipped for a whole host of foreseeable operating conditions? An important part of any operational resilience strategy should focus on having effective governance arrangements in place.

The benefits of having clear organisational direction, transparency over roles and responsibilities and better co-ordination across teams is clear - leading to better resilience outcomes for the firm and the end-investor. The need for effective governance is also reinforced by the regulators who stipulate the board and senior management must be clear on their responsibilities and accountability, ensuring they possess the relevant knowledge, experience and skills to adequately oversee and manage operational resilience requirements. 

The IA Governance Working Group was formed in July 2020 to address common challenges relating to governance and how firms might structure their internal teams and prescribed responsibilities under the new regulations proposed by the FCA in CP 19/32. The findings of this group are contained in our new guidance document which we are publishing to the membership today in conjunction with EY. 

Our report, ‘Effective Governance of Operational Resilience’ contains considerations on effective governance arrangements for investment managers to apply to their specific business model and operationalise. It covers the regulatory requirements and organisational measures firms need to consider, how such principles translate into an effective governance framework, and the practical challenges involved. 

There is no silver bullet as to how a firm might choose to organise their governance arrangements, and accordingly the report is intended to offer a range of approaches for members to adapt as they see fit. For instance, do you need to adapt your existing processes or introduce new ones? This a question that will be answered differently from firm to firm. 

Operational resilience is set to remain in the regulatory spotlight and the IA is committed to helping members as these regulations come into effect. This report is part of a series of guidance documents available to the membership on our dedicated operational resilience expert page, and we will be updating it with further insights in due course. If you have any further questions about the report, please contact John Allan.

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