The PRA and FCA have issued a joint Discussion Paper to outline their views on the approach to Operational Resilience in the financial services sector covering all Firms and FMI’s. Read our press comment.
Operational Resilience has become a key area of focus for both the PRA and FCA; it features heavily in both business plans and has been added into their respective Supervisory Frameworks earlier this year. This follows the introduction of the Chief Operations Function (i.e. SMF 24) who has a prescribed responsibility for managing and ensuring operational continuity and resilience of the internal operations, systems and technology of the firm.
What is Operational Resilience?
The Bank of England has defined Operational Resilience as “The ability of firms and the financial system as a whole to absorb and adapt to shocks, rather than contribute to them”. This goes beyond traditional operational risk and recovery capabilities, with a focus on preserving the continuity of the provision of “critical economic functions” to both the UK economy and to a firm’s customers and clients.
Operational Resilience should form an integral part of a firm’s overall strategy. All Firms and FMI’s are expected to have plans in place to deliver critical services, no matter what the cause of the disruption. This should extend beyond business continuity and disaster recovery, and should include man-made threats such as physical and cyber-attacks, IT system outages and third-party supplier failure as well as natural hazards such as fire, flood, severe weather and pandemic flu.
Implications for firms
The PRA / FCA recognise that embedding operational resilience within firms is a significant undertaking. To begin this process firms should focus on:
More specifically firms will need to consider the following enhancements which could include:
The commercial imperative of Operational Resilience
Beyond the regulatory requirements, there are compelling commercial reasons to embed Operational Resilience:
Key features of the Joint Discussion Paper
The Discussion Paper outlines some key operational resilience considerations for firms:
The consultation period for the Discussion Paper is due by 5th October and the PRA/FCA are encouraging constructive and proactive engagement with all firms. In addition further guidance on Operational Resilience frameworks is expected to be published by the PRA/FCA in late summer this year.
To discuss the implications further, please contact Andrew Husband (mailto:email@example.com), Head of Operational Resilience.