20 December 2005

Resilience Masks the Real Problem: Training...

The UK financial services sector has completed the first phase of it's Resilience Benchmarking Project. More than 60 key firms and financial infrastructure providers from the UK volunteered to take part in the Resilience Benchmarking Project, the results of which were mixed and highlighted a number of significant operational risk issues relating to business continuity. Here is the summary of FSA discussion points:

1 Although the financial system appears to be technologically resilient, are there vulnerabilities in other areas that could put it at risk?

2 What action could the Tripartite Authorities take to help bring together the component parts of the system?

3 How can firms strengthen their collective resilience?

4 Would it be helpful to publish recovery-time targets for wholesale payments, trade clearing and settlement? If so, would 60-80% of normal values and volumes within four hours, rising to 80-100% by the next working day, be reasonable recovery targets?

5 If we decide to publish targets, should these apply to core firms and financial infrastructure providers only, or should they apply more widely?

6 Should we consider publishing targets for other functions such as resumption of trading and retail payments?

7 If we were to publish targets, should these be informal in nature or should they be embedded into rules and guidance?

8 What more can be done to encourage joined-up planning and testing to reflect better the likely impact of a major operational disruption and how this could be facilitated?

9 Could the weaknesses in business continuity and crisis management arrangements undermine recovery time capabilities?

10 Would it be helpful to set a minimum distance criteria between primary and recovery sites? If so, what should that distance be?

11 Should we actively encourage firms to diversify their back-up arrangements, in particular core firms and financial infrastructure providers?

12 Do you agree with our conclusions and proposed actions in relation to recovery service provision? Is there more that the Tripartite Authorities should do in this area – for example including a specific survey on recovery service provision in future benchmarking studies?

13 We invite feedback on the measures we propose to take to mitigate concentration risk: encouraging end-to-end testing; sharing information on resilience and recovery arrangements the financial infrastructure providers have in place; and encouraging wider geographical diversification.

14 Should FSA maintain its non-prescriptive approach to business continuity management?

15 We would welcome comments on the estimated cost of reaching the targets we propose to publish for core firms and financial infrastructure providers:
– from those organisations to which these targets would apply; and
– from other organisations for which these targets might be considered aspirational goals.

16 We would welcome views on the estimated cost of lost business arising from the delayed recovery of a vital counterparty (i.e. a core firm or financial infrastructure provider).

The word "Resilience" occurs 70 times in this 52 page document. The word "Security" occurs only 12 times. The word "Continuity" occurs 63 times. The word "Risk" occurs 52 times. Resilience seems to be the overall theme these days.

The definition of Resilience is an interesting one:

Main Entry: re·sil·ience
Pronunciation: ri-'zil-y&n(t)s
Function: noun
1 : the capability of a strained body to recover its size and shape after deformation caused especially by compressive stress

2 : an ability to recover from or adjust easily to misfortune or change

The definition has a reactive flavor to it with the thought that something is going to happen and when it does, you must be able to recover quickly. With all the synomyms and word games being used today it all comes back to effective training. And this is where the benchmarking study has revealed the corporate business enterprises greatest weakness:

Training is another potential area for improvement. Only 42 firms include business continuity planning in induction programmes for new staff, and ten respondents had provided training to less than 5% of their staff. Fewer than a third of participants have provided training to staff that might be called upon to deal with sensitive issues, such as working on a casualty helpline. The responses to these and a number of other questions indicate a lack of appropriate training needs analysis and a need for greater consideration of the effects of a crisis on those who might be asked to undertake some of the most harrowing and disturbing roles.

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