Why Operational Resilience?

The ‘survival of the fittest’ is an ever-growing reality as firms face change and disruption from a number of angles. How quickly and well a firm adapts and recovers from adverse circumstances is crucial within a context of pandemics, IT disruption, natural disasters and changing third party dynamics. In fact, the resilience of individual organizations is of increasing importance as disruptions affecting one company may have system-wide implications. An effective Operational Resilience (Op Res) Programme is intended to build adaptability and resilience into a firm’s operations, positioning it for continued success. How does this relate to Business Continuity Management? Both concepts are certainly linked; however, OP Res takes a wider and arguably more robust approach to firm survival. Op Res balances the maintenance of an effective operational risk programme to provide ongoing protection of a firm’s critical services as well as the adequacy of business continuity management for disruptive situations. (A very rough analogy would be someone striving for a healthy lifestyle while having good provisions for medical emergencies.) With a good handle on this approach, firms are better able to apply preventive measures, adapt to slower changes and pivot more effectively in the face of disruption. Interestingly, the financial world has seen the emergence of a number of guidance documents and rules in relation to Op Res. For example, the Basel Committee of the Bank for International Settlements published Principles for Operational Resilience in March 2021. The seven principles outlined in the document were:

• Governance
• Operational risk management
• Business continuity planning and testing
• Mapping interconnections and interdependencies
• Third-party dependency management
• Incident management
• ICT including cyber security

These principles can help organizations understand key components for Op Res programmes and how to leverage the relationships between existing management disciplines and their OP Res efforts. Op Res is really not a ‘stand-alone’ discipline championed and implemented by one function. It is a whole of business approach that must be represented at the highest levels of organizational governance and experienced at the level of a firm’s third-party providers. The interconnectedness of business today and the volatility of our context certainly call for a wider view of resilience,and more comprehensive approaches to ensure firm survival. Stay tuned for more information and news on our upcoming virtual sessions on OP Res and related issues!