Published by Jessica Weisman-Pitts
Posted on April 25, 2022
By Guy Warren, CEO, ITRS Group
The Financial Conduct Authority (FCA)’s long-awaited and highly anticipated regulatory framework on operational resilience for financial institutions came into force on 31st March.
The lead time for firms to prepare for this regulatory deadline has been generous – they have had over a year to prepare. But factors such as the pandemic-induced increases in digital transformation and online activity, plus high market volatility as a result of Russia invading Ukraine have made it even more difficult for firms to make meaningful moves towards operational resilience.
As a result, most firms still have a long way to go before they can feel confident they have met their compliance objectives. In fact, since the FCA set the timer for this deadline last year, businesses’ IT estates have only grown larger, more complex and unwieldy.
However, it’s not too late. Firms actually have a three-year transitional period from 31st March – meaning they have until 2025 before the regulator expects them to be operating consistently within the impact tolerances they have set out as part of their operational resilience guidelines
So what can firms do to ensure they are on the right path?
Identify transaction flows
To achieve operational resilience, firms must identify the paths which the key services use, target and remove any points of weakness and build on modern, up-to-date software that can operate across multiple computers so that if one fails, the rest are able to pick up the slack.
Of course, this is not a one-and-done process. As firms inevitably continue in their pursuit of digital transformation, they must seek to replace or update the outdated elements. After all, it’s digital transformation – not digital expansion.
That said, they must take care not to rush. Over 60% of outages occur as a result of poor change management and could be avoided with more careful planning and a system to fall back on if things aren’t up and running in time.
Understand performance and uptime
Businesses will soon be expected to declare the level of performance and uptime they are prepared to commit to and stick to it. This is something firms should start thinking about today as it will require significant historic data to accurately calculate.
Google has popularised Site Reliability Engineering (SRE) the gold standard of uptime monitoring and performance delivery for internet giants and, increasingly, any firms with digital transformation ambitions. The SRE approach involves tracking data and trends over a long lifespan to identify and quickly fix degrading performance levels, and uses both Service Level Objectives (SLOS) and Service Level Indicators (SLIs) as a two-phase early warning system to ensure they are never close to being in breach of their SLA.
Less digitally-native sectors like banking should be following Google’s suit and pursue an SRE approach to operations. While Google has the benefit of massive resources and an incredibly experienced team dedicated to the monitoring of this data, third party providers can support smaller businesses with remote specialists and purpose-built software.
Optimise Cloud usage
A comprehensive stock take of the demand profile of business workloads is a critical first step. Firms must begin by right-sizing their estate and developing a thorough understanding of workload behaviour and demand profiles via detailed analytics.
Once a company gathers all this information, it can optimise its environment for the right workload configuration and accurately plan its monthly cloud spend based on a right-sized environment. This means more accurate instance sizes and, in the majority of cases, decreased financial input.
Pre-test limits
In order to know for sure that the production environment is going to run properly at peak demand, pre-testing is essential to gauge what it can withstand. Firms need to not only identify the overall capacity ceiling of their systems, but specific bottlenecks and pinch points that can affect overall performance.
The right software will enable firms to model certain levels of demand on their systems. Load testing can simulate the number of users on a platform to see at what point the system will fail and provision for it precisely.
Underpinning this is the dire need for monitoring. With different disparate data and flashing alerts all flooding in at the same time, manual processing is inadequate and the right technology is crucial. By onboarding a proactive monitoring system that encompasses physical, cloud and third-party estates, firms can suppress the white noise and hone in on what’s valuable in real-time, helping them predict and mitigate IT failures before they occur.
Integrate security into operations
As opposed to traditional conceptions of security as separate to operations, firms must begin to integrate it into their operations and operational mindset from the get-go. Everyone involved in production should be trained with equal awareness of the critical importance of cybersecurity to ensure that not a single person in the business will let in that Trojan horse. This is particularly important in a COVID-normal world where remote working is increasingly the modus operandi for many.
The new best practice approach involves Zero Trust Networks – challenging firms to provide proof for each transaction made, even inside their own data centre.
Nominate a Chief Resilience Officer
Finally, businesses that want to get on the front foot of new senior management requirements – namely SMF24 in the UK – should look to designate a senior leader to focus solely on operational resilience so that the C-suite’s slate is clean by the time they come under scrutiny. The fact that SMF24 will backdate past discretions makes this all the more important to get on top of today.
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