Navigating Unforeseen Challenges: Building Resilience Through Proactive Strategies

Operational Resilience: Navigating Unforeseen Challenges in the Financial Sector

Preparing for the unexpected may seem like a contradiction in terms, but for financial firms, it is essential for survival. As the sector where the world’s money resides, the financial industry has long been a target for threat actors. With the increasing interconnectivity of the financial ecosystem, the threats to its security and resilience are rapidly evolving and increasing. Therefore, operational resilience, the ability to sustain operations despite attacks and disruptions, has become a critical focus for regulators and industry leaders alike.

The Importance of Operational Resilience

While cybersecurity aims to prevent and defend against cyberattacks, operational resilience goes beyond that. It is a proactive approach to ensure the reliability of digital systems, no matter the circumstances. The sense of reliability is crucial for maintaining public trust in the global financial system.

Operational resilience, however, is not easy to achieve. It requires financial firms to take a comprehensive view of the risk landscape, assess their operations, interconnections, and continuity requirements. By understanding the threat landscape, firms can create effective response plans and establish seamless communication channels with internal and external stakeholders.

Identifying Internal and External Risks

The first step towards operational resilience is to identify the operations that are critical to business management and continuity. Firms need to examine their internal and external systems and determine key dependencies. By understanding the evolving threat landscape, firms can create an effective response plan and ensure that relevant information is readily available to concerned personnel.

Collaboration is essential in understanding the constantly evolving threat landscape. Financial firms cannot work in isolation and must establish communication channels with information-sharing bodies, cybersecurity teams, and government partners. By collaborating, financial institutions can enlarge their view beyond what their own teams and tools provide, minimizing blind spots.

It is also crucial to maintain an in-house inventory of assets, both physical and digital, event classes, and threats. This ensures that financial firms are prepared for the unexpected and can respond promptly and effectively.

Creating a Response Strategy

Financial firms need to determine their risk appetite by assessing the acceptable levels of disruptions for each critical operation. This assessment provides a comprehensive view of the system’s ability to resist, absorb, adapt to, and recover from an incident. It also helps prioritize risks and establish efficient controls and contingency plans.

Building response plans is crucial to ensure continued synchronization across operations during times of crisis. By learning from previous attacks and exercises, financial firms can understand the necessary adjustments and set procedural standards. Additionally, identifying relevant people and teams within the company and determining their roles and responsibilities during risk events is vital.

Taking Action and Becoming Future-Ready

Financial firms must regularly conduct mock drills to test the components of their incident response plan, both internally and externally. This includes involving third-party vendors and ensuring that an executable action plan is in place.

Effective governance, both internally and externally, is necessary to develop and implement a proactive, enterprise-wide strategy that is compliant, feasible, effective, and safe to execute.

Operational resilience enables the financial sector to navigate the increasingly complex world, reduce the cost of disruptions, improve resource allocation efficiency, and respond to emerging market opportunities with agility. It is critical for maintaining and enhancing customer trust and loyalty in a world where cyber incidents dominate headlines and regulators demand resilience.

Collaboration and Intelligence Sharing

Operational resilience cannot be achieved by financial firms alone. Collaboration and intelligence sharing within the global financial community help firms understand current and emerging threats and learn from others’ mitigation strategies. Larger institutions remain at the forefront of cybersecurity, while smaller firms are armed with knowledge and tools to protect themselves.

Regulations such as the EU’s Digital Operational Resilience Act (DORA) emphasize the importance of collaboration and intelligence sharing. This legislation dedicates an entire article to intelligence sharing, recognizing its critical role in operational resilience.

Beyond regulation, the public sector is 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, aim to test communication and coordination channels during major incidents. The goal is not only to minimize operational disruption but also proactively maintain public calm and trust.

Operational risks are no longer bound by geographical boundaries. Cross-border intelligence sharing and exercises allow financial institutions to build a comprehensive approach to operational resilience.

Building Trust and Confidence

Being prepared for the unexpected not only enables financial firms to act with confidence and strength but also fosters trust and confidence from stakeholders. In a globalized world where cyber incidents are daily front-page news, maintaining public trust and loyalty is paramount to long-term business success.

Financial firms must invest in operational resilience, collaborating with internal and external stakeholders and sharing intelligence. By doing so, they can navigate the challenges of an increasingly complex world and enhance their ability to withstand disruptions while embracing emerging market opportunities.

Ultimately, operational resilience is about safeguarding the integrity of the global financial system, protecting the interests of individuals and businesses, and preserving public trust.