Disaster recovery review highlights operational risk issues

HM Treasury, the FSA and the Bank of England have published results from a detailed survey of the UK financial sector's ability to cope with major operational disruption, such as from a terrorist attack or natural disaster. More than 60 key firms and financial infrastructure providers from the UK volunteered to take part in the Resilience Benchmarking Project, the results of which were mixed and highlighted a number of significant operational risk issues relating to business continuity.

The survey aimed to test the the following:

• The resilience of the UK financial sector
• The sector's ability to recover from major operational disruption
• The effectiveness of firms plans and preparations
• Analysis of concentrations or dependencies that could be potential areas of vulnerability
• Actions needed to improve the resilience or recovery capability of the sector

Whilst results showed that many firms have highly resilient IT systems to enable them to recover critical functions rapidly following major operational disruption, other results pinpointed several areas where there is scope for firms to improve their planning and preparation for major operational disruption.

In particular, the survey revealed that the sector would benefit from progressing from a strong, but heavily IT-focused, disaster recovery approach towards the adoption of more rounded business continuity principles. In respect of this, the UK authorities have suggested that firms could strengthen their arrangements by collaborating with key third parties such as infrastructure providers and service suppliers to bring about more co-ordinated planning, testing and risk mitigation.

Additionally, the survey highlighted the significant geographical concentration of some critical business functions and back-up sites in and around London, a matter which will be a major concern to the sector following the terrorist attacks in London earlier this year.

Each participating firm has received a detailed individual benchmarking report. Commenting on the operational risk/business continuity issues raised, Hector Sants, Managing Director of the FSA's wholesale firms division, said: "Several participants have described this exercise as very helpful in terms of improving business continuity teams' understanding of their firms' critical business functions. This is a welcome development but highlights that firms need to do more to ensure that business continuity staff are sufficiently aware of the business functions they are supporting."

"Almost all participant firms have already indicated that they are planning to make changes to their business continuity arrangements as a result of what they have learned from the project. We will aim to build on our existing approach of identifying what constitutes good practice and sharing this with firms."

Further information on the Resilience Benchmarking Project survey are available on the FSA website.