What are the PRA’s perspectives on interactions between OCIR and Operational Resilience?

Following the Prudential Regulation Authority’s (PRA) publication last week of a series of four Consultation Papers concerning Bank Resolution and Operational Continuity in Resolution (OCIR), some of the more interesting takeaways covered the Regulator’s perspectives on how resolution and operational resilience will interact. Looking through both the Consultation Paper and the proposed Supervisory Statement, FourthLine have pulled out three key operational resilience callouts made by the PRA that firms should consider as they develop and build out their programmes.

Callout 1: Operational resilience of critical or essential service provision should not be undermined by restructuring related to recovery or resolution

The PRA’s proposed Supervisory Statement makes clear that operational continuity is essential, not just in business as usual (BAU) time but also “during and after resolution”. This expectation applies where critical or essential services are also important business services under the PRA’s operational resiliency policy.

Question to consider: What changes to operating practices are likely to occur in resolution and how would these impact on your Important Business Services identified and the agreed tolerances for service disruption?

Callout 2: Firms should be calling out the interplay between key definitions of each Policy

The PRA confirmed that “it is likely that a firm’s important business services will be a part of a firm’s critical functions or core business lines”. The expectation is that firms should document coherent narrative between what is ‘critical’ or ‘core’ for OCIR and what is ‘important’ for Important Business Services under operational resilience.

Question to consider: Have criteria been clearly articulated, documented and challenged where differences have been identified between ‘critical functions’ and Important Business Services?

Callout 3: Firms should be looking to leverage synergies and overlap between the two proposed Policies

The PRA expects firms to consider how they may be able to use the identification and documentation of their critical and essential services to support implementation of other PRA policies, or leverage other record-keeping requirements to support their OCIR identification and documentation. End-to-end process documentation exercises being conducted to ensure adherence to the requirements of the ‘Mapping’ aspect of the Operational Resilience section of the PRA Rulebook, could likely be utilised for OCIR, or vice-versa.

Question to consider: Is process mapping between similar programmes fully integrated to avoid duplication of both effort and disruption to already stretched process stakeholders?

Next steps:

With the operational resilience Policy Statement due in early 2021, now is the time to be having and finalised conversations internally about the best way to drive an efficient and complementary programme that will add value across a number of areas. For further information, FourthLine have prepared an operational resilience insights pack that you can download [here].

For a more detailed conversation around your operational resilience requirements, feel free to book a consultation with FourthLine’s Risk Consulting Director:

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Topics: Featured, operational resilience

November 4, 2020
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Ross Molyneux
Written by Ross Molyneux

Ross leads our Risk Consulting proposition and specialises in risk management and regulation. He has worked extensively across non-financial and financial risk management engagements in his time in consulting in both the UK and New Zealand.