On 9 April 2021, the Central Bank of Ireland ("Central Bank") published Consultation Paper 140 - a Consultation on Cross Industry Guidance on Operational Resilience ("Consultation Paper"). The Consultation Paper seeks views on the Central Bank's proposed guidance which aims to "enhance operational resilience and recognise the interconnections and interdependencies, within the financial system, that result from the complex and dynamic environment in which firms operate".
Darren Maher, partner: "It is clear that the Central Bank understands that the financial services industry is operating in an increasingly complex and interconnected environment and that in many cases, firms rely on both national and international outsourcing service providers to support their operations. While firms will already have established risk management processes and have governance arrangements in place, the Central Bank is of the view that more is needed to be done. While it recognises that not all hazards can be prevented, the key is that firms, and the financial services sector as a whole, should be able to identify and prepare for, respond and adapt to, and then recover and learn from an operational disruption.
These three "pillars" are the focus of the recent Consultation Paper and draft guidance on operational resilience issued by the Central Bank. The Central Bank maintains that these pillars create a holistic approach to the management of operational resilience and related risks and create "a feedback loop that encourages repeatedly embedding lessons learned into a firm's preparation for operational disruptions". Compliance with the three pillars should ensure that the "risks to the firm's operational continuity do not transmit into the financial markets and that the interests of the customers and market participants are safeguarded during business disruptions."
Of particular note, and not surprisingly given the Central Bank's focus on the role of the board and senior management in regulatory matters in recent years, is the emphasis on the role of the board and senior management in this space which is weaved throughout the three pillars. Firms should ensure that the contents of the draft guidance are brought to the attention of the board and senior management now, to ensure their awareness of the likely changes and the necessary steps which will need to be taken to improve operational resilience in line with the three pillars. Once finalised, the guidelines must, in line with the Central Bank's expectation, be brought to their attention once again. The Central Bank has made it clear that firms will need to be able to demonstrate that they have applied the guidelines within an appropriate timeframe but in any event, at the latest within two years of the Guidance being issued"
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