The Art of Adaptation: Building Operational Resilience through Proactive Measures

Ensuring Operational Resilience in the Financial Sector

Introduction

In an increasingly interconnected and digitized world, financial firms face a growing number of threats to their security and operational resilience. The rise of cyberattacks and the potential for disruptions have made it essential for these firms to prepare for the unexpected. While cybersecurity focuses on preventing and defending against attacks, operational resilience goes beyond that by ensuring continuity of operations with minimal disruptions. Recognizing its importance, regulators have begun emphasizing the need for financial institutions to be prepared for unforeseen incidents. This article explores the concept of operational resilience and provides advice on how companies can enhance their preparedness.

Operational Resilience: Beyond Business Continuity

Business continuity management and disaster response have long been established functions within financial institutions. However, operational resilience goes beyond ensuring the smooth handling of disruptions and adopts a proactive approach to maintaining the reliability of digital systems. It is crucial for maintaining public trust in the global financial system. Achieving operational resilience is a complex task, but there are steps that firms can take to begin this journey.

Step 1: Get a holistic view of the risk landscape

To build operational resilience, financial firms must first gain a comprehensive understanding of their risk landscape. This involves conducting a thorough assessment of operations, interconnections, and continuity requirements. By identifying critical operations and dependencies on internal and external systems, companies can better prepare for potential disruptions. It is also important to stay aware of the evolving threat landscape and establish effective communication channels with internal and external stakeholders, including cybersecurity teams and government partners.

Step 2: Create a response strategy

Financial firms should determine their risk appetite by defining acceptable levels of disruptions for each critical operation. This enables them to prioritize risks, develop efficient controls, and create contingency plans for potential threats. Building response plans and assigning roles and responsibilities to relevant personnel and teams ensure synchronized operations during crises. Learnings from previous attacks and exercises should be utilized to continually improve response strategies.

Step 3: Be prepared to take action

Regular mock drills are crucial to test the effectiveness of the incident response plan. These drills should include both internal and external stakeholders, such as third-party vendors, to ensure a coordinated and executable action plan. Effective governance, both internally and externally, is essential for developing and implementing a proactive, enterprise-wide strategy that is compliant, feasible, and safe to execute.

Becoming Future-Ready in a Globalized World

Operational resilience is not achieved solely within individual firms. Intelligence sharing within the global financial community is essential for understanding current and emerging threats and learning from others’ mitigation strategies. This collaboration keeps larger institutions at the forefront of cybersecurity and equips smaller firms with the knowledge and tools to protect themselves.

Regulations, such as the EU’s Digital Operational Resilience Act (DORA), emphasize the importance of intelligence sharing. The public sector is also increasingly collaborating with the private sector to protect critical infrastructure, including the financial sector. Large-scale exercises, such as the US Treasury Department’s Hamilton Series and NATO’s Locked Shields, are conducted to test communication and coordination channels during major incidents. The goal is not only to minimize disruption but also to maintain public calm and trust.

Conclusion

Operational resilience is essential for financial firms to navigate an increasingly complex and interconnected world. By adopting a proactive approach, firms can reduce the cost of disruptions, improve resource allocation efficiency, and ensure agility in responding to emerging opportunities. Collaboration and intelligence sharing within the financial community are crucial components of operational resilience. Firms must recognize that operational risks are not limited to geographic boundaries and must build comprehensive approaches to resilience. When firms are prepared for the unexpected, they can act with confidence and foster trust and confidence from stakeholders necessary for long-term success.

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