A Guide for Risk and Resiliency Planning for Financial Institutions

The Importance of Risk Management for Financial Institutions

This is part one of a five-part series aimed at managing risk in the financial industry. Download the guide or follow the links to read all five parts.

This is Part One: Understanding Operational Resilience in the Financial Sector

Part Two: Strategies for Robust Risk Management

Part Three: Embracing Unpredictability with an Agile Resiliency Plan

Part Four: Case Study on How a Top Financial Institution Handles Operational Resilience

Part Five: Future Perspectives for Staying Resilient in an Ever-Changing Financial Landscape

Part one: Understanding Operational Resilience in the Financial Sector

In the ever-evolving landscape of the financial industry, resilience has become a crucial factor for success. With the constant threat of unpredictable events and disruptions, financial institutions must have strong risk management strategies in place to ensure their operations can withstand any challenges. However, it’s not just about being prepared for the unexpected—it’s also about building resilient relationships with customers, stakeholders, and regulators.

We will explore the importance of resilience planning for financial institutions and how it can help strengthen their relationships and ensure long-term success.

Understanding Operational Resilience in the Financial Sector

Operational resilience is a critical aspect of the financial sector. It encompasses various strategies and practices that help institutions anticipate, adapt to, and recover from disruptions. This includes events such as cyber-attacks, natural disasters, regulatory changes, and economic downturns.

Understanding operational resilience involves the identification of vulnerabilities, classification of risks, and mapping dependencies within an organization. When you conduct regular audits and dynamic mapping exercises, financial institutions can gain a comprehensive view of their operational landscape, including application relationships, dependencies, and business functions. This knowledge is crucial for the assessment of the potential impact of disruptions and the implementation of effective risk management strategies.

Dependency Mapping Exercises

One key component of operational resilience is dependency mapping exercises. This process involves identifying the relationships and dependencies between applications or workloads within an organization. When you map out these dependencies, financial institutions can better understand their attack surface risk and potential areas of vulnerability. This insight enables them to prioritize their efforts and resources to mitigate these risks and protect critical systems and processes.

Operational Agility

Operational resilience also encompasses the need for operational agility. This means having the ability to adapt and respond to changing circumstances quickly. Financial institutions must establish orchestrated controls that can be activated during disruption to ensure business continuity and minimize the impact on customers, stakeholders, and operations.

Compliance Assurance

In addition to agility, operational resilience involves compliance assurance. Financial institutions must comply with many regulations, and failure to do so can result in severe consequences. By implementing robust risk management strategies, institutions can improve compliance, reduce operational risk, and enhance operational resiliency.

To achieve these objectives, financial institutions may consider ring-fencing and snapshot applications. This approach involves isolating critical applications or workloads and taking periodic snapshots to preserve their integrity. In the event of a disruption, these applications can be quickly restored, which minimizes downtime and ensures the continuity of essential services.

In summary, operational resilience in the financial sector requires a comprehensive understanding of vulnerabilities, dependencies, and risks. When you conduct audits, map dependencies, and implement strategies for operational agility and compliance assurance, financial institutions can improve cyber resilience, reduce operational risk, and enhance their overall operational resiliency. These efforts are vital to ensure long-term success and maintain trust with customers, stakeholders, and regulators.

Read part two or download the guide.