FCA's Operational Resilience Guidance: Your Firm's Roadmap to Surviving Disruptions

The Financial Conduct Authority (FCA) has issued a comprehensive guide on operational resilience, emphasising the critical need for firms to prepare for and withstand disruptions. With a looming deadline of March 31, 2025, financial institutions must act now to ensure they meet the new requirements. Let's break down the key takeaways and their implications for your business:

Core Requirements: Building a Resilient Foundation

• Identifying Important Business Services: This is more than just which services are most easily replaced. You need to consider a broader range of factors to determine which services are critical to your operations and customers.

• Setting Impact Tolerances: Be specific! It's not enough to say you can tolerate an outage for "X hours." Consider various metrics, including financial loss, reputational damage, and regulatory implications.

• Mapping and Third-Party Resilience: Thoroughly map your internal resources and external dependencies, especially those third-party relationships. Remember, a weak link in your supply chain can cripple your entire operation.

• Scenario Testing: Your testing plans need to be sophisticated. Don't just test for minor hiccups; prepare for severe but plausible scenarios using various methods.

• Vulnerability Remediation: Once vulnerabilities are identified, don't delay. Develop fully funded and well-governed plans to fix them quickly.

• Response and Recovery Plans: Have robust plans for responding to disruptions buying time for recovery to minimise the impact on customers and operations.

• Governance and Self-Assessment: Your self-assessments should demonstrate your journey towards operational resilience, showcasing your risk management strategies, testing results, and remediation efforts.

Beyond Compliance: Embedding Operational Resilience

Operational resilience isn't just a regulatory checklist; it's a cultural shift. Embed resilience into your decision-making, risk management, and overall company culture.

Horizon Scanning: The Never-Ending Vigilance

Don't become complacent! The threat landscape is constantly evolving. Continuously scan for new and emerging risks, update your scenarios, and test your resilience regularly.

The Bottom Line for Firms

• Act Now: Review your current operational resilience framework and make the necessary changes to comply with the FCA's requirements. Time is of the essence.

• Justify Your Decisions: Thoroughly document and explain your choices for essential business services, impact tolerances, and risk mitigation strategies.

• Get Serious About Testing: Make sure your scenario testing is comprehensive, challenging, and up-to-date.

• Prioritise Risk Management: Actively identify and address vulnerabilities, focusing on those with the highest potential impact.

• Foster a Culture of Resilience: Operational resilience should be ingrained in your company's DNA, not just an afterthought.