There have been many high profile, and countless other, examples of outsourcing firms struggling, or even failing, over the last few years. As a consequence of this and the growing complexity of business operations and reliance on technology, firms looking to outsource, or with arrangements already in place, are increasingly focusing on ensuring operational resilience and business continuity in connection with their outsourcing arrangements.
It is an area of significantly increased scrutiny in public sector outsourcings and, in the financial services sector, has become a key area of regulatory attention. On 5 December 2019, the FCA, PRA and Bank of England all published their joint and coordinated Consultation Papers on new requirements to strengthen operational resilience in the financial services sector. The consultations are, among other things, a response to the Treasury Select Committee’s investigation into IT failures within the financial services industry.
Areas of focus include governance and supervision, outsourcing policies, concentration risks, security and data, risk assessments and supply chain due diligence. From a business continuity perspective stakeholders are also looking at termination and exit rights and arrangements – in both planned and distressed scenarios. For many outsourcing arrangements living wills can play a significant role in assisting customers to maintain operational resilience.