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Banking on Resiliency In Trying Times

Created: 30 Sep 2009 • Updated: 12 Aug 2011
David Krauss's picture
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With So Much at Stake, Financial Institutions Bank on Resiliency to Thrive in Trying Times

Reputation damage – Everybody’s talking about data breaches. But what about resiliency?

Most financial institutions will agree that protecting their brand and building customer confidence is a top priority in today’s volatile economic climate. A big part of achieving this is keeping sensitive customer data safe and secure from both external and internal threats. After all, the last thing any bank wants right now is to be a headline for a public data breach that compromised thousands of their customers’ financial records.

While data loss prevention is and should be a top concern for financial institutions, an often overlooked component of maintaining customer confidence (and their deposits) is delivering the 24X7 availability and operational resiliency that customers demand of their financial institutions today.

Where does technology fit in?

In today’s information age, technology has become a key piece of the puzzle.   So business continuity is further refined to encompass information technology and communications services. That means managing the risk associated with all its components—from the business applications and phone systems to networks and storage. Recovery from a branch server crash, an ATM malfunction, a denial of service in online banking, or a storm-ravaged datacenter must be achieved in haste with little to no interruption in technology service. There’s simply too much at stake.

What do regulators have to say?

Just like an institution’s credit posture and liquidity, operational risk and business continuity is very much on the regulators’ radar - forcing institutions to address various aspects of business and IT continuity.   For example, the international banking business standard, Basel II, which was created to strengthen the processes larger banks use to manage risk (including operational risk), has direct business continuity requirements.  In fact, of the seven specific risk event categories in which compliant banks are required to demonstrate management competence, three directly relate to business continuity. 

The Bottom Line

Reputational risk is not the only thing at stake. Operational resiliency can also impact the bank’s revenue stream. As Tom Wills from Javelin Research puts it, “In these times when customers expect instant gratification, a disruption of, say, online banking services for even a few hours can have a very significant negative impact on the institution’s bottom line…If the website is down or overloaded… some [customers] will stop using online banking or use it less in the future, and some will close their accounts.”

Acquiring and retaining customers is a key initiative for financial firms,  and technology will continue to play an increasing role in enabling institutions to sustain stability and the perception of strength in an increasingly volatile marketplace.   It’s reasons like these that should make continuity planning top of mind.

 
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