Financial services firms must stick together
KPMG's Rick Cudworth argues because businesses in the financial services industry are highly interdependent, they should embrace collective resilience
Since the atrocities of 9/11, business continuity has been, and remains, high on the board-level agenda. Increasing global threats now make the resilient organisation a strategic imperative. With reputation, employee welfare and shareholder value at stake, it is a subject no organisation should ignore.
The financial sector supply-chain is highly inter-dependent and transactions are often near instantaneous. According to the Supply Chain Resource consortium at North Carolina University, supply chain disruptions caused by events such as 9/11 have negatively impacted shareholder value by as much as eight to 10 per cent in companies.
Recent research has found that increasing global threats are now making the resilient organisation a strategic imperative.
So what is a resilient organisation? According to the recent KPMG UK paper, 'Living on the frontline', a resilient organisation is one able to manage the potentially devastating consequences of events, deploy a diverse business continuity strategy and is able to respond effectively and in co-ordination with key stakeholders. In summary, such an organisation will be able to maintain its most critical operations, and ultimately survive all but the most extreme forms of operational disruption.
However, whilst multiple complex issues and challenges must be addressed, flexibility and simplicity must be at the heart of successful business continuity and corporate response. Continuity arrangements must be integrated into the everyday business and crucially look outside as well as inside the organisation.
The financial services industry has already begun to embrace collective resilience. Businesses in this sector are highly interdependent. By adopting the attributes of 'the resilient organisation', companies will in turn make a significant contribution to the overall prize of 'collective resilience'. There is evidence that many companies are refocusing their efforts to not only protect but potentially to enhance shareholder value through business continuity.
In the evolution towards 'the resilient organisation', and building on business continuity preparations to date, there are a number of key elements which require consideration:
People - the complex but vital response to people-related issues, understanding the balance of corporate and individual responsibilities, having the flexibility to manage changes in demand in the immediate aftermath of a major disruption and dealing with the human impact of large scale disasters
Diversity - exploiting technology and common global processes to achieve greater diversity (eg, the ability to move operations quickly to other parts of the world, the use of remote working and split-site operations)
Coordination - the ultimate success of an individual organisation's business continuity capability is more dependent than ever on its counter-parties
Exercising - practice of business continuity arrangements and corporate response is becoming more regular, more sophisticated and more connected, both across the organisation and industry-wide. While business continuity has become increasingly co-operative; this does not diminish the underlying competitiveness of organisations as they seek to maximise the value of their investment
Flexibility - when a 'disaster event' occurs organisations are likely to face changes to the 'normal' demand profile and flexibility of response is essential. These changes in demand will potentially compound the effects of reduced staffing levels as a result of the disaster event itself and create a significant back log. The ability to move available resources or transfer work to help meet changes in demand in the short term must be considered and adequately addressed.
The reality is that in today's business environment no organisation is an island. Understanding the degree of mutual dependency and integration with other parties will ultimately determine the success of any individual business continuity plan.
Flexibility and simplicity in planning and response is essential to effective business continuity and is transferable to day to day business which can enhance shareholder value.
The testing and exercising of business continuity arrangements will be more regular, more rigorous and more sophisticated. Exercises will be conducted not just locally, but inter-regionally within global organisations. Experience tells us that the financial sector must hope for the best but prepare for the worst.
Rick Cudworth, Partner-in-Charge of KPMG's Business Continuity Centre of Excellence
Disclaimer: The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG UK LLP. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity.
The KPMG 'Living on the frontline' paper on business continuity and financial services firms can be downloaded on the kpmg.co.uk website at http://www.kpmg.co.uk/services/ras/index.cfm
