Basel Committee publishes consultation paper on ‘high-level principles for business continuity’
The paper is intended to support international standard setting organisations and national financial authorities by ‘providing a broad framework within which more detailed business continuity arrangements might be developed that are more closely tailored to unique sectoral and local circumstances’. The principles also promote a ‘common base level of resilience across national boundaries’. The Joint Committee states: “The high-level principles in the paper have been developed for two distinct but related audiences - financial industry participants and financial authorities. While these groups have different perspectives, roles and responsibilities in the event of a major operational disruption, both are integral in any meaningful effort to improve the financial system's resilience to such disruptions. The principles are not intended to be prescriptive, nor does their broad applicability mean a one-size-fits-all approach to business continuity. An organisation's business continuity management should be proportionate to its business risk (arising from both internal and external sources) and tailored to the scale and scope of its operations.” Seven high-level principles that ‘build upon traditional concepts of effective business continuity management’ are set out in the paper. These are: (taken verbatim from the document summary) Principle 1 emphasises that the requirement for sound business continuity management applies to all financial authorities and financial industry participants and that the ultimate responsibility for business continuity management - not unlike the management of other risks - rests with an organisation's board of directors and senior management. Principle 2 advises organisations that they should explicitly consider and plan for major operational disruptions. While this concept may be new for many organisations, it is considered important in light of the increasing frequency of such events. Principle 3 states that financial industry participants should develop recovery objectives that reflect the risk they represent to the operation of the financial system. Financial industry participants that provide critical services to, or otherwise present significant risk to the operation of, the financial system should target higher standards in their business continuity management than other participants. This concept may be new for some financial industry participants. Because the steps necessary to improve the resilience of the financial system may be more costly than the steps such participants would choose to undertake on their own, financial authorities are encouraged to participate, as appropriate, in identifying recovery objectives that are proportionate to the risk posed by a given participant in order to achieve a reasonably consistent level of resilience. Principle 4 stresses the critical importance of business continuity plans addressing the full range of internal and external communication issues an organisation may encounter in the event of a major operational disruption. The principle specifically recognises that clear, regular communication during a major operational disruption is necessary to manage a crisis and maintain public confidence. Principle 5 highlights the special case of cross-border communications during a major operational disruption. Given the deepening interdependencies of financial systems across national boundaries, this principle advises financial industry participants and financial authorities to adopt communication protocols that address situations where cross border communication may be necessary. Principle 6 emphasises the need to ensure that business continuity plans are effective and to identify necessary modifications through periodic testing. Finally, to ensure that financial industry participants are in fact implementing appropriate approaches to business continuity management that reflect the recovery objectives adopted in accordance with Principles 1 and 3, Principle 7 calls upon financial authorities to incorporate business continuity management reviews into their frameworks for assessing financial industry participants. The paper provides a detailed overview of each of these principles and provides appropriate case studies. Comments on this consultative document should be submitted to the Joint Forum Secretariat, c/o Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland by 10th March 2006. Comments may also be submitted via e-mail to baselcommittee@bis.org or by fax to +41 61 280 9100. Access ‘High-level principles for business continuity’ from the summary page at http://www.bis.org/publ/joint14.htm or download as a 42 page PDF here: http://www.bis.org/publ/joint14.pdf
•Date: 22nd Dec 2005 • Region: World • Type: Article •Topic: Financial sector |
