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BFSI Disrupted: The Importance of Operational Resilience For Financial Institutions

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Banking, financial services, and insurance firms along with their regulators are becoming increasingly determined to focus on operational resilience and business continuity. The increasing dependency that the segment has on complex systems, third parties, automation, and technology has led to an obsession to eliminate failure or outages in the first place. Any company that witnesses disruption is often held to account with its reputation at risk of being tarnished in the marketplace. A certain expectation has been developed from the BFSI (banking, financial services, and insurance) segment to deliver their services without that any failure or delay.

Business continuity strategies inclusive of crisis management and disaster recovery help financial companies swiftly respond to and recover to the event of disruptions seamlessly and very effectively. Keeping evolving crises in mind, it’s crucial for companies of every segment to deploy an infallible business continuity management plan but for financial enterprises, it is paramount because of the amount of dependency it carries on other domains. BFSI has always and will continue to be susceptible to the challenges of resiliency, technological disruptions, and security. On top of that, the pressure to ensure real-time and round-the-clock services have made the situation even worse.

The surging evolution of technologies is the foremost reason behind the challenges but brings solutions as well.  Business continuity management software isn’t a new concept. Companies have been around it for a while but usually for accomplishing regulatory compliance. But, not to the surprise, the software can be a lifesaver for businesses during the tough times of crises and disasters. Especially in a finance firm where downtimes, network outages, and servers can’t be accepted at any cost. Integrating continuity systems can establish resilience and improve it over time.

Although the reasons to adapt operational resilience are obvious, it is worth considering why resilience is essential.

  • Regulation requires operational resilience plans. You can face extravagant fines and penalties resulting from failure to comply. Every domain occupies its own regulation and governance, varying from generic health and safety measures to domain-specific requirements.
  • Customer loyalty is greatly affected by halted and poor service. Whether caused by tangible service outages, a poor IT service, or new governance policies, firms can face substantial reputational damage.
  • Events like disasters can result in losses in data and errors in processes. This can have a significant impact on the stakeholders and processes who/which  equip your services. If transactions or processes aren’t completed or are in processing mode, reprocessing and investigation can yield time and resources, and in the meantime, it can compound the reputational damage.

5 Ways Operational Resilience Can Be a Gamechanger for your Finance Organization

  1. Clear synergies across strategic and financial resilience: A company’s overall operational resilience can be segregated into strategic resilience (the resilience of the firm’s strategy and market position) and financial resilience. Giving equal attention to both strategic and financial resilience can help organizations to align their approach in the direction of operational resilience. A well-calculated business continuity plan helps anticipate and navigate both the enterprise and the financial vulnerabilities to take preventive measures beforehand and save mission-critical operations.

  2. Enhanced customer trust and loyalty: An operational resilience plan for recovering rapidly to deliver smooth customer experiences can be a major brand differentiator. Institutions that aren’t prepared to handle interruptions and crises are incompetent in the eyes of the public. On the contrary, your business continuity management plan is the engine behind a smooth recovery and preserves your much-treasured brand value and goodwill. Assessing business impact and risks helps prevent adverse shocks from occurring and if they do occur, proper planning ensures continuing deliverance of key business services as seamlessly as possible.

  3. Saves from operational risks, its costs, and regulatory sanctions: An end-to-end focus on business continuity activities, and clearer accountabilities aid institutions to eliminate complete operational risks. Moreover, it gives better control over the probability of business threat and its impact, thereby reducing regulatory capital requirements and the costs of penalties and other regulatory fines.

  4. Enhanced positioning for mergers, acquisitions, and expansion: Having a clearer understanding and optimization of readiness activities such as business continuity, disaster recovery, operational resilience, and compliance along with response activities such as crisis management and emergency notification enable companies to allocate resources more efficiently. Moreover, a better understanding and mapping of business services, systems, data, resources, and processes help organizations to commence mergers and acquisitions more proficiently while enabling them to plan for future endeavours such as business expansions, new branch openings, and launching new services.

  5. Meet your regulatory compliance requirements: Developing and updating business continuity planning is crucial in heavily regulated sectors, such as financial services, and several regulatory bodies demand businesses of critical domains to equip an incident response strategy. Even fewer minutes of downtime can result in millions of dollars in fines and irreparable damage to your firm’s reputation.

Deutsche Bank faced a civil monetary penalty of $9 million due to an inefficient disaster recovery plan in 2016. The bank witnessed a swap reporting platform failure and then failed to report and reflect the data properly for the next five days, amassing the fine for breaching reporting requirements. However, if the bank had equipped an up-to-date business continuity management platform, things would have been different. It had offered its teams a crisis management strategy for tracking, scrutinizing, and notifying the reporting platform outage, in real-time, saving a substantial amount of money and reputation.

The challenge of resiliency and security has always and will continue to be a significant issue at the forefront of banking and finance service providers. The challenge will continue to escalate because of the exponential growth of technology and its complexity combined with the need to maintain a real-time or always-on organization to enable participants to survive and compete in the modern marketplace. However, adopting operational resilience as a lifestyle for your business can not only save you from modern disruptions but can create opportunities out of it as well.

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