Business Continuity

Banks services are referred as “Processes”, dismountable in activities, some of them absolutely necessary for the execution and completion of the services themselves.  Unplanned interruptions of a service, could cause significant damage or inconvenience to the Clients, to the banking system and to the bank itself, up to the point to jeopardize its own survival.

While the term “Credit Risk” highlights the economical value involved with third parties, Clients and banks, the term “Operative Risk” refers to the economical value involved as a consequence of negative events occurred that may hinder, over a reasonable level, the regular completion of the activities.

The Operative Risks indeed, differently from other kinds of risk, deliberately undertaken by the banks, based on a calculation of mere economical convenience for the business (“risk/performance entity”), are assumed by the banks for their simplicity without any financial remuneration correlated to the extent of the risks.

The above consideration lead all the banks, to pay special attention to this family of risks aiming to the goal of identifying, evaluating and measuring its existence. In order to manage this typology of risks properly, banks have to identify the causes of any huge operative loss with the objective to eliminate them completely, bound them or restrict their negative consequences.

Each bank, beside other concerns, is requested to address this issue according to the new rules and regulations by Bank of Italy and Basel II Framework, therefore a bank needs to undertake an in-depth analysis aimed to formally identify some delicate aspects that could impact the business as usual, and to provide “mitigation” solutions to minimize the operative risks detected.

Business Continuity of Bank of Italy and Operative Risk of Basel II: common aspects

Both rely on a common approach based on mapping the internal structure of  processes and the impact that events related to them, may have on the “business”.

The analysis must adapt dynamically to any change may occur within the organization or at process level and cannot be simply a static snapshot of the current situation. 

However the management must be enabled to act promptly and dynamically to recover from the overall company operational risk, provided that management in charge can use a “company dashboard” for its decision making that allows a detailed analysis of each single process and that can be a valid support for scenario simulation and evaluation of potential event or organizational and process structure change.

Both need to start from the analysis of the impact and from the analysis of the vulnerability  to evaluate risks and consequent mitigation activities to be carried out, in other words, both need to develop the “Business Impact Analysis”, that is a “must” for their respective objectives.