# A guide to building business resilience in the financial services sector
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-03-04
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: Open Banking Initiative Reveals UK Financial Sector IT Problems
Meta Description: Discover how the UK's new Open Banking initiative is revealing the scale of IT problems in major banks, and how the FCA's updated requirements can
URL: https://financedigest.com/a-guide-to-building-business-resilience-in-the-financial-services-sectorhtml

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_By **Chris Huggett,** VP EMEA, Sungard Availability Services_

Thanks to the UK’s new Open Banking initiative, the scale of IT problems within the financial services sector has become apparent, with major banks typically suffering well over [one outage per month](https://www.bbc.co.uk/news/business-47280513), according to a report published by the BBC. With this in mind, the Financial Conduct Authority (FCA) published [an updated discussion paper](https://www.fca.org.uk/publication/consultation/cp19-32.pdf) in December, detailing new requirements to help strengthen operational resilience in the sector.

The document encourages firms to consider the impact of disruption and the many reasons for which it can occur, i.e. technology failures, cyber-attacks and weather-related and other environmental incidents. This can have significant impact this has on the people, businesses and [financial](https://www.financedigest.com/financial-advice-for-starting-your-own-business.html "Financial advice for starting your own business") markets that rely on the products and services businesses provide. To remedy the current situation, the [report proposes four core areas](https://www.financedigest.com/high-barrier-packaging-films-for-pharmaceuticals-market-set-for-5-cagr-through-2029-blisters-remain-top-application-area-says-a-new-fmi-report.html "High Barrier Packaging Films for Pharmaceuticals Market Set for 5% CAGR Through 2029; Blisters Remain Top Application Area, Says a New FMI Report") of focus: visibility, thresholds, testing and third-party management.

**Visibility**

![Chris Huggett](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/chris-huggett-450x321-1736838945119-compressed.jpg)

Chris Huggett

The report stipulates that firms need to identify and document the people, processes, technology, facilities and [information that support their important business](https://www.financedigest.com/software-to-display-your-businesss-important-information.html "Software to Display Your Business’s Important Information") services (also known as ‘mapping’). By mapping systems and processes based on the [business services](https://www.financedigest.com/more-companies-investing-heavily-in-business-services-software.html "More Companies Investing Heavily In Business Services Software") they support, firms can bring more transparency to, and improve the quality of, decision making, thereby improving their overall resilience and availability. The term ‘business service’ here refers to something that, if disrupted, would be most likely to cause intolerable levels of harm, to its customers, to the firm itself or, to the broader financial system.

**Thresholds**

The report also advises that organisations in the [financial services sector](https://www.financedigest.com/iot-for-the-financial-sector.html "IoT for the Financial Sector") must set ‘impact tolerances’ for each important business service. These are thresholds for the maximum level of disruption tolerable before [consumer protection](https://www.financedigest.com/the-digital-finance-revolution-empowered-consumers-turn-digital-to-protect-financial-security.html "The digital finance revolution: empowered consumers turn digital to protect financial security") and/or market integrity becomes compromised.

Impact tolerance is expressed through specific outcomes and metrics, which the [report stipulates should always include the maximum length of time](https://www.financedigest.com/credit-suisse-executives-reassure-investors-after-cds-spike-financial-times-reports.html "Credit Suisse executives reassure investors after CDS spike, Financial Times reports") that a disruption can continue. It can also comprise other considerations, such as the volume of disruption, for example, the number and types of consumers affected or a measure of [data which has been breached](https://www.financedigest.com/how-financial-organisations-can-stay-protected-from-financial-data-breaches.html "How Financial Organisations can Stay Protected from Financial Data Breaches "), stolen or lost. When setting impact tolerances, banks need to consider any factor which will drive a significant increase in [demand for business services](https://www.financedigest.com/euro-zone-april-business-activity-grows-on-strong-services-demand-pmi.html "Euro zone April business activity grows on strong services demand – PMI"), as these are the times when availability is the most critical.

Once this has been set, organisations can set about finding [ways of expanding their impact](https://www.financedigest.com/six-ways-women-in-leadership-can-make-an-impact.html "Six ways women in leadership can make an impact") tolerance – for example, hosting private data-centres within co-located facilities or arranging for workplace recovery solutions.

**Testing**

Given the huge importance attributed to the ability to view and access funds by both business and consumers, [firms must](https://www.financedigest.com/oil-firms-must-step-up-exploration-off-norway-to-unlock-potential-npd.html "Oil firms must step up exploration off Norway to unlock potential -NPD") regularly simulate a range of severe but plausible disruption scenarios and conduct lessons-learned exercises to invest in their ability to respond to real-life disruptions. This shouldn’t only focus on preventing incidents from occurring or the probability of the incident taking place, but the response and recovery [actions firms would take to protect](https://www.financedigest.com/british-pm-rishi-sunak-pledges-further-action-on-strikes-to-protect-lives.html "British PM Rishi Sunak pledges further action on strikes to ‘protect lives’") the continuity of operations.

Scenarios can be based on anything from the loss or reduced provision of technology to the unavailability of facilities, [key stakeholders or third-party services](https://www.financedigest.com/why-faster-reactivity-to-end-of-life-deadlines-is-key-for-financial-services.html "Why faster reactivity to end-of-life deadlines is key for financial services"). An effective method of conducting tests is to base scenarios on previous incidents or near misses from across the [financial sector](https://www.financedigest.com/financial-companies-delivering-better-value-for-customers-in-loyalty-programmes-compared-to-other-sectors.html "Financial companies delivering better value for customers in loyalty programmes compared to other sectors") and in other sectors and jurisdictions. Firms could also consider future risks, such as evolving cyber threats, technological developments and [business model](https://www.financedigest.com/cfos-its-time-to-own-the-business-model.html "CFOs: It’s time to own the business model") changes. An example of this can be seen in The Bank of England’s recent announcement of its plans to perform [climate change-related stress tests](https://www.cityam.com/bank-of-england-to-set-up-climate-change-stress-tests/) on the UK’s top banks and insurers, to assess how firms would deal with more frequent weather events and mass sell-offs of “brown assets” – those considered detrimental to the environment.

[**Third parties**](https://www.financedigest.com/why-a-replacement-to-third-party-cookies-is-key-to-post-pandemic-recovery.html "Why a replacement to third party cookies is key to post-pandemic recovery")

Technology is driving huge changes in the operational [landscape of the financial services](https://www.financedigest.com/trends-in-the-financial-service-landscape-and-the-impact-on-fraud.html "Trends in the financial service landscape and the impact on fraud") industry. This is perhaps best reflected in the rise of cloud-native [challenger banks](https://www.financedigest.com/the-rise-of-challenger-banks.html "challenger banks"), that are quickly setting the agenda in terms of enterprise agility and customer experience, effectively redefining how firms in the sector succeed. However, the rapid adoption of new and revolutionary technologies like cloud computing are also expanding the risk landscape in the [financial services sector](https://www.financedigest.com/overcoming-information-overload-in-the-financial-sector.html "OVERCOMING INFORMATION OVERLOAD IN THE FINANCIAL SECTOR") at an unprecedented rate. Firms now not only have to be aware of the resilience of their own systems, but also must be able to trust in the resilience of third-party providers and the [technology solutions](https://www.financedigest.com/grain-and-cereal-crop-market-novel-technological-solutions-will-create-lucrative-growth-opportunities.html "Grain And Cereal Crop Market : Novel Technological Solutions Will Create Lucrative Growth Opportunities") they provide.

Firms [must take the due diligence to ensure the third parties they use to connect with their customers](https://www.financedigest.com/lost-in-translation-why-banks-must-learn-the-language-of-their-customers.html "Lost in Translation: Why Banks Must Learn the Language of their Customers") adhere to similar standards as they do. For example, third-party providers may exist outside of a firm’s [regulatory perimeter or in multiple](https://www.financedigest.com/how-to-navigate-multiple-data-privacy-regulatory-frameworks.html "How to navigate multiple data privacy regulatory frameworks") jurisdictions with different, or lower quality, resilience requirements. Firms should therefore thoroughly investigate how third-party relationships could undermine their ability to absorb disruption, asking questions such as: _which legal jurisdiction is the provider subject to? What are the physical security characteristics offered by the provider (i.e. physical controls in the data centre or staff vetting)? Are there suitable arrangements for dispute resolution?_

With the right [backup and cloud storage](https://www.financedigest.com/ransomware-storage-and-backup-techniques-and-limits.html "Ransomware, storage, and backup: techniques and limits") provider effectively acting as a first line of defence against both expected and purely circumstantial disruption, businesses will be able to establish an infrastructure built with resilience and prepared for every eventuality.

**Final thoughts**

In increasingly complex and [fast changing](https://www.financedigest.com/the-future-of-energy-tech-and-data-are-driving-change-fast.html "The Future of Energy: Tech and Data are Driving Change, Fast") business environment, organisations must be able to prevent, adapt, respond, recover and learn from disruptive operational incidents. The financial [services sector](https://www.financedigest.com/protecting-the-uk-financial-services-sector-from-cyberattacks-now-and-in-2023.html "Protecting the UK financial services sector from cyberattacks now and in 2023") must be aware not only of the threats of disruption which come from within and outside, but also the ability to anticipate threats. Being [resilient and ensuring availability will be critical for UK banks and our economy](https://www.financedigest.com/stocks-dollar-gain-on-resilient-u-s-economy.html "Stocks, dollar gain on resilient U.S. economy") as a whole.


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