Establish Operational Resilience in Financial Institutions

LAGOS (Capital Markets in Africa) – Historically, financial institutions focussed on internal business resilience management (i.e. business continuity plans and testing thereof) and this was generally enough to ensure operational resilience. However, mass protest actions, terrorism, social and/or political unrest, ailing national infrastructure, interconnectedness of financial systems, increase in denial of service attacks and increasing use of and/or reliance on third parties to support key operations are forcing financial institutions to change the way in which they assess and ensure their operational resilience today.

Interconnectedness of financial systems and its sensitivity to external factors have become clear in the last decade given the global financial crisis and the impact of occasional technology breakdowns in systemically important financial institutions and Financial Market Infrastructures (“FMIs”) in the financial eco-system. Strong FMI’s and systemically important financial institutions play key roles in ensuring operational resilience of and confidence in the financial system but by implication also pose systemic risk.

Every financial institution and FMI in the financial system has to ensure its operational resilience and expect other financial institutions and FMI’s to do the same.

Operational resilience risk associated with outsourcing and 3rd party service providers
Operational resilience is an increasing challenge for financial institutions who use or rely on third parties to conduct or support them in the delivery of their key operational and IT capabilities. Whilst the business case for outsourcing certain core functions, business activities, systems and/or infrastructure may be sound, the financial institution still remains accountable for the resilience of the operations outsourced.

An extract from the INTO AFRICA August Edition: Driving Africa Opportunities. Please download by clicking: INTO AFRICA PUBLICATION: AUGUST 2018 EDITION.

Contributor’s Profile
Shyest Bijou is an experienced senior financial services risk management specialist having worked across retail, investment and commercial banking and asset management at major financial institutions both in South Africa and internationally over the past 17 years. In addition, Shresti is a non-executive director on the board of ORX (the largest global operational risk association in the financial sector) since April 2016.