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Disaster Recovery: FSA urges firms to up

their game

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Every major FSA regulated firm in London needs to have a comprehensive and robust plan to cope with a disruption to its operations.

Michael Foot, a managing director at the FSA, says:

“It is essential that all firms in the financial services sector ensure that they are properly prepared. None of us can afford to be complacent about the challenges that inevitably arise in an environment where the potential threat is so great.”

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Since last year’s terrorist attack on New York and Washington, the Financial Services Authority has worked to improve its ability to cope with an event that closed its own HQ in Canary Wharf and which threatened the smooth operation of key firms and financial markets in the UK. (See Note to Editors below). While this builds upon the FSA’s longer standing preparations, during the last year the authority has taken additional steps to buttress its contingency arrangements, including the development of its back-up site. It has also begun a series of simulations of emergency events that would interrupt the normal functioning of the financial service sector. These are designed to prepare its staff for such eventualities and to test its infrastructure.

The FSA has also worked closely with the financial services sector, HM Treasury, and the Bank of England to raise business continuity standards more generally.

This work has been designed to ensure the authorities are able to communicate quickly with those institutions whose continued operations are critical to the payments and settlement systems and markets on which London’s key international and domestic markets are based.

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Michael Foot says:

“The FSA, along with the Treasury and Bank of England, has worked closely with the financial services industry to raise standards. Consequently, the ability of key firms and the authorities to respond to a disaster or operational failure has improved markedly over the past year.

“However, improving business continuity arrangements is an ongoing process requiring leadership from the top and all of those involved are continually looking at ways to up our game. It is important we get it right since London is a major financial centre and any interruption to business here would have an impact globally.”

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At the same time, the FSA has stepped up its assessments of the disaster recovery readiness of the key firms it regulates. The response of these firms has been impressive; a large amount of senior management time has been dedicated to this issue and substantial investment made.

In short, the aim is to ensure that:

• key firms and markets have robust contingency plans; and
• firms and markets can communicate with each other during an emergency, even if some lines of communication are not operational; and
• a quick reaction is possible to any disruption in trading, settlement and payment functions.