Financial services firms are under increasing pressure to optimize resilience in their operations given the dynamic pace of change and growth within the market.

Foundational industry impacts are also challenging financial services organizations to be able to adapt swiftly and adeptly to new rules and demands. For example, there has been a 72% increase in payments volumes since 2014 while trading activity has also increased, with the notional level of derivatives contracts held by US banks hitting $192.5 trillion in 2023, up 175% since 2003.^1,2 Needless to say, with these increases and an associated rise in complexity, the risks of failure have grown exponentially.

Resilience is a priority on several fronts:

• Clients expect it. Public failures such as missed deposits or payments make headline news and impact the reputation of a firm.
  
• Regulators demand it. Regulators have been repeatedly highlighting both the importance of resilience and their ‘zero tolerance’ attitude to firms who do not pay heed.
• Firms require it. Urgent escalations, issue resolution, and managing unexpected impacts are costly, an unwelcome distraction for leadership, and impede a firm’s pursuit of its planned objectives for growth and scalability.

Implementing Operational Resiliency within Change Delivery

Operational resilience is broad and complex. However, there are a few key themes that are easier to introduce into an ongoing change delivery book-of-work. By extending the business requirements definition to include these themes, each change item can secure a bite-sized element of available change funding to deliver business resiliency benefits in addition to what was originally scoped. Adding these considerations into the initial stages of the project life cycle is beneficial to:

• Raise awareness of the needs for operational resiliency
• Influence the solution design to be more operationally resilient from the start
• Secure funding within the sizing and estimation of the project from the start.

Foundational Themes to Consider

Each firm is unique and needs to consider their own priorities, however Capco has identified four themes which are foundational and can be applied into the regular change book of work. 

Operating Model

Ensuring focus is on integrating automation, minimizing manual touchpoints, and streamlining operations, ensuring consistency and reliability in their processes. Leveraging STP with exception-based models to maintain a high level of performance during peak demand periods, enhancing an organization’s ability to adapt to changing market conditions.

Business requirements to consider:

• Any manual process steps and/or workarounds required before vs after change and why these are not STP.
• Any handoff points from team to team and to define how these are monitored.

Data Strategy

End-to-end data integration with data quality controls to ensure data integrity and accuracy. Designing solutions with timely, automated and monitored data integration between the systems. To provide accurate and timely information for reporting and business decision making especially in times of market volatility or adverse situations.

Business requirements to consider:

• Consumption model of business owned, curated data using managed provisioning points and data quality controls.
• How data augmentation or corrections are maintained in the system of record.

Production Support

Organizations must ensure capabilities to quickly recover from unexpected disruptions, such as technical failures, cyber incidents, or natural disasters. Regularly updated and tested disaster recovery plans ensure that the organization can continue operations under adverse conditions, protecting critical business functions.

Business requirements to consider:

• Escalation SLA’s, processes and owners for issues or outages.
• Notifications or communications required for client outreach at a time-of-service disruption.

Scalability

A scalable platform is fundamental for sustaining business growth and future capacity for change delivery. This flexibility helps the organization respond effectively to maintain reputation, competitive advantage, and operational stability.

Business requirements to consider:

• How this solution is providing scalability and robustness for the next change requirement.
• Agree specific definitions of required capacity for now and the future – volumes, latency, processing times, client / product types, data sources etc.

Firms will benefit from acknowledging and incorporating these foundational themes during the initial project budgeting and planning phases, allowing thoughtful consideration during subsequent phases, from requirements to post-production. If each change initiative takes some steps toward embedding operational resiliency, this can also help protect that investment from future funding reallocations and restrictions.

How Capco Can Help Implement Operational Resiliency

 

At Capco, we leverage our deep financial services knowledge to define our operational resilience capability. We are ready to work with you to assess opportunities for strengthening operational resiliency, and ensure that it is accorded appropriate prioritization and funding to better prepare for any future adverse or unexpected situations.

References

¹ https://www.nacha.org/content/ach-network-volume-and-value-statistics
² https://www.occ.gov/publications-and-resources/publications/quarterly-report-on-bank-trading-and-derivatives-activities/files/q4-2023-derivatives-quarterly.html