September 20, 2023

Operational Resilience Insights from Real-world Incidents

In today's world, where businesses are evolving by the minute, operational resilience is really important for businesses to be successful. Businesses often face situations involving various...

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In today’s world, where businesses are evolving by the minute, operational resilience is really important for businesses to be successful. Businesses often face situations involving various types of obstacles that impact their operations, so they need to have a strong risk management strategy in place. In this blog, we will look at actual operational resilience insights and shed light on the techniques used to avoid them. 

Silicon Valley Bank Capital Crisis in 2023

On March 10, 2023, Silicon Valley Bank had a bank run and a capital crisis, which became the second-largest failure of a financial institution in the history of the USA. The bank declared a need for 2.9 billion dollars to strengthen its balance sheet. The bank started fundraising; the depositors saw this as a sign of insolvency, so they withdrew their money, causing the bank to run. These operational resilience insights highlight the need for improvement in risk management in the financial sector.

SVB could have improved its risk oversight; hiring a CRO(Chief Risk risk officer) might have helped them avoid this incident. Most of the board members of SVB were inexperienced in terms of risk oversight. SVB had improper risk and resilience governance since they could not foresee that the depositors might withdraw their money. The bank could have improved its liquidity risk management by keeping adequate liquidity buffers to withstand short-term disruptions and having contingency plans for times of financial stress.

Facebook outage in 2021 

A significant disruption occurred on October 4, 2021, when Facebook, Instagram, and WhatsApp were unavailable for about six hours. A “configuration change” on routers caused the infrastructure to go down. This was one of Facebook’s most significant outages. Significant financial losses were caused, especially for companies that depended on Facebook and Instagram for advertising. If it had been prioritized from the start, this outage might have been avoided. The downtime might have been cut short or avoided altogether with improved risk management.

For systems that support critical infrastructure, redundancy, and failover, It becomes crucial to maintain strict surveillance. It is even more crucial to diversify the risk mapping and boost a culture of resilience. We cannot exaggerate the significance of open communication, redundant authentication, disaster recovery planning, and incident response training. Maintaining resilience against disruptions requires ongoing proactive efforts and post-incident analysis to identify areas for improvement.

British Airways IT Failure In 2017

British Airways had an IT failure that impacted around 75,000 passengers over the late May bank holiday weekend. Later, British Airways made a statement that it happened because of an uncontrolled return of power (a power surge issue), but the backup systems that should have been working were also inoperable, causing all the flights to be canceled. The IT failure happened on May 27 and May 28 and lasted for a few days with some residual effects. Baggage handling was one of the most affected functions of the airline; many cancellations and delays happened due to the IT failure. This operational resilience insights highlights how better risk management could have prevented this incident altogether.

Implementing redundant IT infrastructure, backup systems, and regular maintenance would provide critical failover options. A well-tested disaster recovery plan, advanced monitoring tools, and alerting systems would enhance problem detection and response. Well-trained staff and assessing third-party vendor reliability would improve crisis management. Regularly holding audits and continuously improving IT would help prevent such IT failures.

Some Benefits of Having Operational Resilience  

Operational resilience stands as a cornerstone in the strategic arsenal of organizations, encapsulating their capacity to endure, pivot, and rebound in the face of diverse disruptions and trials. Here are some benefits of operational resilience:

  • Business Continuity: Operational resilience ensures that a business can maintain its essential functions during unexpected disruptions, minimizing downtime and financial losses. This continuity is important for maintaining customer satisfaction and trust. 
  • Risk Management: By identifying vulnerabilities and building redundancy into processes and systems, operational resilience lets organizations manage and mitigate risks. This means they can identify potential issues before they escalate and become a problem for the organization, reducing the impact of disruptions. 
  • Regulatory Compliance: Many industries are subject to strict regulatory requirements regarding business continuity and disaster recovery. Maintaining operational resilience helps organizations remain compliant with these regulations, avoiding legal and financial penalties. 
  • Reputation and Trust: Customers and stakeholders value reliability and consistency. Operational resilience demonstrates an organization’s commitment to delivering dependable service, enhancing its reputation, and building trust among its audience. 
  • Cost Efficiency: While investing in operational resilience measures may require initial expenditures, it leads to long-term cost savings by reducing financial losses from downtime, lowering recovery costs, and potentially decreasing insurance premiums. 
  • Competitive Advantage: In an era of increasing disruptions, organizations with robust operational resilience have a competitive edge. Operational resilience encourages organizations to adopt agile and innovative practices. They can respond to challenges more effectively, potentially gaining market share from less-prepared competitors. 

Operational resilience is not only about managing risks; it is also a strategic imperative so that organizations can thrive and endure in an unpredictable and dynamic environment. 

Is your organization ready to face unexpected challenges like these? 

Discover our Resilience Management Platform, “AutoResilience”, an industry-leading platform recognized by analysts like Gartner and Forrester. Autoresilience has four pillars: Risk, Crisis, Business Continuity, and Cyber Resilience. Not only have we helped numerous banks globally reduce the impact of disruptions, but we have also ensured regulatory compliance and safeguarded their reputations.