FCA sets out final operational resilience requirements

NEWS RELEASE: Today the FCA set out its final rules and guidance on new requirements to strengthen operational resilience in the financial services sector. The new rules will come into force on 31 March 2022.

Requirements include identifying important business services, setting impact tolerances for the maximum tolerable disruption and carrying out mapping and testing. Firms must also have identified any vulnerabilities in their operational resilience.

Frank Brown, Head of Transformation and Risk at Bovill, commented:

“It may seem like the deadline for operational resilience requirements is far in the future, but the reality is that there is a huge amount to do. Operational resilience is not Business Continuity Management 2.0. and will require much deeper thinking from financial services firms.

Firms will be required to satisfy themselves that they have captured all their important business services, set impact tolerances, and undertake mapping and scenario testing to ensure operational services can continue to be delivered. Whilst the regulator won’t necessarily be viewing these documents as part of BAU supervision, firms can be sure that they will be asked about operational resilience if things go wrong. In those instances, senior managers, as per SMCR regulations, will find themselves having to justify the reasonable steps they took to arrive their conclusions.

It will be important for firms to ‘look through the right end of the telescope’ – the focus should be on the impact on customers and counterparties, not the impact on the firm. The level of disruption the firm thinks is acceptable may be very different to the level the customers can accept.

For firms who outsource functions, examining operational resilience may expose risks that cannot be brought inside tolerance levels. In those instances, firms will have to decide how they can extract themselves from the outsourced relationship, find another supplier, or bring the function in house.

And whilst the focus is on a select group of firms (banks, insurers, e-money providers), there is an expectation that all firms should consider the guidance and apply the existing rules within the handbooks. We are already seeing operational resilience cited in reporting requests from the FCA, so all firms need to ensure their processes are up to standards as soon as possible.”

Firms can also download our Operational Resiliance whitepaper, exploring the proposed framework and building a business for the long term

ENDS

Notes for editors

*Figures from FCA Financial Lives Survey 2020.

Guidance for firms on the fair treatment of vulnerable customers | FCA

For further information, please contact:

Polly Barton – Bovill

+44 (0)20 7620 8440

pbarton@bovill.com

Tabitha Adams – Luther Pendragon

+44 (0)7500 013062

bovill@luther.co.uk

About Bovill

Bovill is a specialist financial services regulatory consultancy, established in 1999 and headquartered in the UK with offices in London, Chicago, Singapore and Hong Kong. Our sole activity is the provision of high-quality, technically-focused advice and consultancy services on all aspects of financial services regulation. We aim to develop effective solutions to the complex problems of our clients, and do not offer commoditised advice or services. Bovill has experts spanning all aspects of financial regulation in the UK, EU, Asia and the Americas.

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