2022 COMMENTS & CONTRIBUTIONS | Resilience Required

“Ensuring the UK financial sector is operationally resilient is important for consumers, firms and financial markets,” reads a recent policy statement issued jointly by the UK’s Prudential Regulation Authority, its Financial Conduct Authority, and the Bank of England. “The disruption caused by coronavirus (Covid-19) has shown why it is critically important for firms to understand the services they provide and invest in their resilience,” they added.1“We expect firms to perform mapping and testing so they are able to demonstrate their ability to stay within their impact tolerances,” Bank of England Executive Director David Bailey said in a late April 2022 speech, with reference to events that may impair operational resilience.2

A recent report3 issued by the International Organization of Securities Commissions (IOSCO) outlines key lessons regarding operational resilience learnt during the pandemic. Among them, IOSCO asserts that, “operational resilience means more than just technological solutions.” It depends equally so on the resilience of a firm’s “processes, premises and personnel.” It is the role of regulators and supervisors to test firms’ operational integrity and organizational resilience. Their relevant examinations most often focus on the mechanics of execution, within firms and across the financial system. But perhaps it is as important to consider the integrity of a firm’s purpose, as lived out in day-to-day employee behavior? Would it not be helpful if supervisors had insights into how risk governance was aligned with company values, with a view both to what this implies for its operational resilience as well as its operational risk profile?