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man working on his laptop Business resiliency and elastic infrastructure in FIs          

The impact of the COVID-19 pandemic will continue to be felt by financial institutions (FIs) around the world. Operational challenges resulting from increased demand for certain services, social distancing and remote work are pushing resiliency plans to their limits. While many institutions have responded quickly to protect their people and sustain business operations, they still must determine how to maintain operations as these conditions continue for the foreseeable future.

With that in mind, we offer considerations for maintaining business resilience during this pandemic, including the notion of elastic infrastructure, and how the challenges we face today can guide resiliency plans.

Testing capabilities, not scenarios, to prepare for the unknown

What we’ve seen over the past 8 to 10 weeks of the health and economic crisis is that most financial institutions have risen to the occasion.

One of the major efforts FIs focused on after the 2008 financial crisis was financial resiliency, and it wasn’t until recently that financial institutions began homing in on operations and business continuity in the digital age. While testing operational resilience became a discipline in its own right, it has primarily focused on business continuity plans; developing monitoring, communication and escalation protocols; and engaging board directors and senior management. Not many organizations have focused on testing real-world capacities in a full-blown crisis.

For example, many FIs had plans to meet the needs of a remote workforce distributed around the globe. They did so by formulating scenarios matching conditions where a limited remote workforce might be necessary, and then building an infrastructure to address that scenario.

This approach works well until a situation emerges such as the COVID-19 pandemic. How do you prepare for a situation where more than 50% of your workforce is quarantined for an extended period? How do you mobilize an infrastructure distributed across multiple locations when those locations are shut down?

That is why it is important for FIs to plan against severe yet plausible scenarios, and advance existing testing efforts by including actual production element to assess the overall capabilities of the infrastructure. They should assess what the infrastructure can support and under which conditions it fails, and then link that to their risk tolerance. This will help FIs determine how their infrastructure responds under extreme stress, identify blind spots or points of failure, and reshape that infrastructure with those extreme conditions in mind.

The role of cloud computing in developing elastic infrastructure

One of the goals of an effective resilience framework is to inform the design of an elastic infrastructure.

Attempting to build infrastructure against increasingly challenging and rare scenarios comes with a huge price tag. The better path for financial institutions is to invest in infrastructure that is scalable and flexible under different stress conditions. Such elastic infrastructure can make FIs more resilient in the face of extreme conditions by allowing the redeployment of critical resources.

Elastic infrastructure enables agile responses and the capability to rapidly and effectively re-provision assets and infrastructure. This requires FIs to get three things right:

  • Clear prioritization of critical and non-critical infrastructure and capabilities
  • Pre-positioning across on-prem and off-prem sites, and with relevant third-party vendors
  • Advanced diagnostic capabilities that monitor real-time infrastructural demands and challenges as they arise

These requirements are fundamental to cloud-enabled companies. While the cloud isn’t necessary to build elastic infrastructure, we see it as the core of a modern responsive resiliency plan. The cloud’s ability to support this kind of testing, monitoring, scalability, flexibility and relatively low price point makes it a platform that allows institutions to remain responsive in good times and bad.

Conclusion

Financial institutions are constantly learning from the past to help mitigate risk in the future.

We can’t predict that future, however, and COVID-19 is a good example of how things can change quickly and profoundly.

We believe that cloud-enabled organizations will develop the kinds of elastic infrastructure needed to address resiliency today. This blog is the first of a series of articles that will cover how to pursue that elastic infrastructure. The next will discuss how cloud-enabled businesses situate themselves to build an elastic infrastructure. In a later piece we’ll also discuss how tools like automation, combined with proper human guidance, can further help FIs prepare their infrastructure.

 

The views expressed in this article are those of the authors and do not necessarily reflect the views of Ernst & Young LLP or other members of the global EY organization.