Operational resilience through the COVID lens

The COVID-19 crisis and the subsequent shift to almost total remote working overnight has seen operational resilience brought into ever sharper focus for firms and regulators alike. In order to assist firms in achieving full compliance with the FCA’s draft resilience regulations, we’ve taken a fresh look over this important work and reviewed previous guidance.

Identifying important business services remains a significant step on the resiliency journey, as outlined in the FCA’s Consultation Paper on Operational Resilience (CP 19/32).

Once these services have been identified, it makes it easier to prioritise resiliency efforts towards these services and map their underlying dependencies to establish single points of failure. An IA working group under the Operational Resilience Committee was initially formed to look at this topic last year, with the assistance of Baringa Partners LLP, in line with the draft regulations. The culmination of this group’s work was launched at our conference in December.

However, the impacts of COVID-19 and the publication of a package of consultation papers on operational resilience by the regulators prompted us to reassess this group’s work. In fact, whilst COVID-19 has had a devastating human impact, it has also proved to be a useful stress test of a ‘severe but plausible scenario’ for firms.

Recent events have brought to light what services and underlying processes are crucial to prioritise to ensure a continuity of service to clients. The initial guidance was assessed against members’ experiences of current events, firms’ own developments and the publication of the draft regulations. Based on this, and the lists of important services shared anonymously by firms, the guidance was revised with minor changes to reflect the developments in firms’ thinking, and provided to the FCA to keep them informed of proactive industry efforts. .

The fact the recent health crisis was also a crisis for markets and liquidity management has revealed firms need to prepare for events beyond traditional business continuity planning and perhaps take a slightly different view on the importance of risk reporting and liquidity management functions when operating under stress. Accordingly, the experiences of firms navigating the challenges regarding managing liquidity and volatile markets has been reflected in the new guidance.

We are pleased to launch our revised guidance ‘Operational Resilience: Important Business Services’, assisting firms with identifying their important business services. If nothing else, this virus has taught us that in order to prepare for the unexpected we need to continuously adapt approaches and challenge assumptions.

Please do get in touch with your thoughts or if you wish to discuss, and stay updated with our ongoing activity through our resilience and COVID-19 webpages, and webinars. 

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