The FCA’s Executive Director of Supervision – Investment, Wholesale and Specialist, Megan Butler, gave a speech at the TISA’s Operational Resilience Forum in London about their joint consultation paper published on 5 December 2019 regarding operational resilience. Her speech addressed the outcomes the FCA is seeking from the new requirements and expectations that operational resilience is strengthened, so that firms “are more focused on the continuity of supply of the financial products and services that people, businesses and the wider economy rely on most, even in the event of severe operational disruptions”.

Operational resilience is defined as the ‘ability of firms, financial market infrastructures and the financial sector as a whole to prevent, adapt, respond to, recover and learn from operation disruptions.’

The FCA’s expected outcomes include:

  • Creating a shift in mind-set, from firms prioritising their own commercial interests to considering the vulnerabilities of consumers and the financial system as a whole when making decisions.
  • Firms looking forward and making decisions today that help prevent harm tomorrow and preventing operational incidents from impacting consumers, financial markets and UK financial system.
  • Firms being in a position to continue providing business services that are heavily relied on, even in the event of severe operational disruptions. Firms should have robust contingency plans in place that take into account high impact but low probability events so they are prepared for the worst.
  • Firms identifying and documenting any important business services where a disruption of the service could cause intolerable harm to consumers or the financial system as a whole.
  • Firms establishing their ‘impact tolerance’, which encompasses an assessment of the maximum level and duration of disruption to an important business service.
  • Firms continuously taking steps to identify resilience gaps by testing their ability to withstand a severe event, and to go a step further by taking actions to ensure they remain within their impact tolerances.

These outcomes are a reflection of the FCA’s continuous efforts to ensure that consumers and the financial system as a whole remain protected, and stress the importance in reviewing the effectiveness of firms’ governance, which continues to be an important factor in assessing firms’ operational resilience capabilities.