The importance of clearly interpreting your Important Business Services (IBS) with appropriate detail, is critical. With an unambiguous definition of customer, process and intolerable harm, setting and testing impact tolerances becomes significantly more accurate and straightforward.
A common pitfall of IBS identification is to consider processes through the lens of pre-existing organisational structures or departmental responsibilities, for example, First notification of loss (FNOL), Claims handling or Claims settlement.
This approach makes it difficult to clearly align the IBS with intolerable harm. This is because intolerable harm is almost always related to the Settlement or Completion of the process and doesn’t easily relate to the process initiation or processing steps.
A good test is to determine whether the customer feels they either receive a clear benefit from your defined IBS or they would consider a service to be completed. For example, registering a claim with an insurer provides no clear benefit to the customer directly, and a customer would only consider the service as complete or beneficial when the claim had been settled or an intermediary benefit arranged or provided (e.g a courtesy car).
A further pitfall is to capture multiple products and customers under a single Important Business Service. This approach doesn’t consider that a failure to deliver different products may lead to significantly different intolerable harms and with varying timescales.
For instance, a claim for a damaged TV is significantly less impactful than a claim for a damaged Oil Tanker. Similarly, different customers using different products also suffer distinct intolerable harms and are likely to have greater tolerances to impacts, for example, a High Net Worth individual is less likely to suffer intolerable harm from a missed payment than a financially vulnerable customer.
Therefore, insurance firms with multiple product lines and an overarching Claims IBS, for example, can only set intolerable harm definitions and impact tolerances at the lowest common level, whether that is for a TV or a Tanker.
However, an Important Business Service with a clearly defined customer with discrete customer deliverables will have a specific definition of intolerable harm and an accurate impact tolerance because it is clear what harm you are considering, to whom and when that harm is likely to occur.
The benefit for insurers in adopting this approach will be;
FourthLine is working with financial services clients to help them with Operational Resilience enablement, through a mixture of end-to-end consulting and resourcing propositions.
Download our Operational Resilience Service Deck here now>
To find out more about how we can help you with your Operational Resilience framework, click here>