BFSI Disrupted: The Importance of Operational Resilience For Financial Institutions

Banking, financial services, and insurance firms along with their regulators are becoming increasingly determined to focus on operational resilience and BCM. 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. Thus, the marketplace can hold companies accountable for experiencing disruptions, which puts their reputation at risk. The BFSI (banking, financial services, and insurance) segment has developed a certain expectation to deliver its services without any failure or delay.

Business continuity strategies inclusive of crisis management and disaster recovery help financial companies swiftly respond to and recover from the event of disruptions seamlessly. Keeping evolving crises in mind, it’s crucial for companies of every segment to deploy an infallible business continuity management plan. Although, for financial enterprises, it is paramount given the amount of dependency it carries on other domains.

BFSI has always been 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 tough times of crises and disasters.

In a financial institution, where any downtime, network outage, or server failure cannot be accepted at any cost, active measures must be taken to ensure uninterrupted operations.

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

• The 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, poor IT service, or new governance policies, firms can face substantial reputational damage.
• Events like disasters can result in losses of 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: Operational resilience has two main components: strategic resilience and financial resilience. Prioritizing both can help organizations align their approach. A BCM plan can anticipate and navigate vulnerabilities, saving critical operations through preventive measures.
2. Enhanced customer trust and loyalty: An operational resilience plan is for recovering rapidly to deliver smooth customer experiences. It can be a major brand differentiator. The public considers institutions that cannot handle interruptions and crises as incompetent.
3. On the contrary, your BCM plan is the engine behind recovery and preserves your much-treasured brand value and goodwill. Assessing BIA 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.
4. Saves from operational risks, 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 threats. It reduces regulatory capital requirements and the costs of penalties and other regulatory fines.
5. Enhanced positioning for mergers, acquisitions, and expansion: Understanding and optimizing readiness activities like business continuity, disaster recovery, and operational resilience helps companies allocate resources more efficiently. Mapping business services, systems, data, resources, and processes enable organizations to conduct mergers and acquisitions more proficiently and plan for future endeavors like expansions, branch openings, and new services. Knowing how to respond to crises with crisis management and emergency notification is also important.
6. Meet your regulatory compliance requirements: Developing and updating BCM is crucial in heavily regulated sectors, such as financial services. The 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. The Bank failed to report and reflect the data properly for the next 5 days. Thus, massing 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. A crisis management strategy for tracking, scrutinizing, and notifying the reporting platform outage, in real-time, would have saved them.

Resiliency and security remain top concerns for finance providers. As technology grows more complex, maintaining real-time operations becomes increasingly challenging. However, adopting operational resilience for financial institutions as a lifestyle can save businesses from disruptions and create opportunities.