The past 18 months have seen operational resilience take centre stage with UK regulators, to help achieve their core objectives – the FCA's concern to ensure consumers are protected and markets continue to function well, and the PRA's concern with ensuring the stability of the UK financial system through its focus on the safety and soundness of the firms it regulates.   

The COVID-19 outbreak, which has impacted over 100 countries and been classified by the World Health Organisation as a public health emergency of international concern, has brought firms' crisis management into the sharpest imaginable focus. The FCA is, with the Bank of England, actively reviewing the contingency plans of a wide range of firms, with a focus on firms' assessments of operational risks, the ability of firms to continue to operate effectively and the steps firms are taking to serve and support their customers. The FCA is also in active ongoing dialogue with firms, institutions and trade associations on the issues they are facing as the pandemic evolves. Unprecedented financial support has been put in place by central banks internationally to ensure the smooth functioning of the global financial system. 


As the crisis unfolds, financial services firms of all types and sizes are expected to keep the 'lights on' and the financial system flowing. Now more than ever the country cannot afford disruption to critical business services such as clearing, payments, credit and cash.

As HM Treasury introduces a range of measures to support individuals and businesses in a highly vulnerable economy, financial services firms will be the engine that implements much of these mission-critical outcomes and their capacity as good citizens will be tested, as exemplified by the recent coordinated communications on bank lending and on the issue of dividends or other distributions of capital. Banks lending to retail customers must be alert to conduct risk while they face difficult decisions on issues such as modifying agreements, forbearance, creditworthiness and dealing with an increased pool of vulnerable customers. We discussed some of these issues in our recent briefings, Consumer Finance: COVID-19 and Creditworthiness Assessments and Consumer Finance: Forbearance & COVID-19.

UK regulators expect firms to continue to meet their ongoing compliance and regulatory requirements, but they are taking a pragmatic approach, recognising that firms may need to meet the standards and undertake the activities from backup sites or while operating with large numbers of staff working remotely.


The regulators have deferred to 1 October 2020 the response deadlines for the operational resilience consultations that were scheduled to close on 3 April 2020. The operational resilience agenda, at its core, requires firms to make a "step-change" from considering their own commercial interests in the event of a disruption to considering the vulnerabilities of consumers and the financial system as a whole. We outlined the consultations in our January briefing, Operational Resilience.

The operational resilience proposals ask firms to consider and then ensure (through a range of measures) that they maintain important business services when disasters emerge. Faced with a most egregious threat in COVID 19, the deferred consultation deadlines are a logical step. The industry is engaging – in real time – in the key activities dictated by the resilience agenda. This includes investigating various lock-down scenarios, across a range of tolerances and client types and ensuring services remain operational despite the pandemic. For international banks, in particular, this entails accounting for a range of measures designed to accommodate divergent polices, practices and levels of crisis across the globe. We can reasonably expect more consistency of approach over the coming months.

Firms are also actively evaluating third party/supplier arrangements, considering how these firms are administering their own staff and services through the current crisis. Key features which will affect third party contracts will include issues and concerns around the application of immediate payment terms by key suppliers as they look to manage cash flows, key man marking, force majeure application and managing sudden or erratic volumes of service provision (both up and down, depending on the service) and how this impacts any volume commitments. 

Another area of concern with regard to third party arrangements is the need to comply with the EBA Outsourcing Guidelines which, among other things, require firms to undertake a remediation project to review and amend existing outsourcing contracts. Firms must "complete" the documentation of all existing outsourcing arrangements (other than those to cloud service providers) in line with the Guidelines following either the first renewal date of the arrangement or 31 December 2021, whichever is earlier. If a review of outsourcing arrangements of critical or important functions is not concluded by 31 December 2021, the relevant competent authority should be informed with the firms' planned measures or exit strategy to be implemented. 

Given that many outsourcing agreements can be for a 5 year term, this timeframe was already challenging and firms' capacity for conducting the necessary reviews will be impacted by COVID-19. We would expect that some firms may seek to agree certain variations to contracts either as a temporary measure or otherwise which could then trigger a review and possibly in light of these events cause firms to reclassify certain contracts which are now seen as critical/important. 

As at the time of writing, the EBA has recommended that competent authorities make full use, where appropriate, of the flexibility embedded in the regulatory framework to support the banking sector, however we await specific guidance on outsourcing issues.


As commercial enterprises, subject to comprehensive market pressures and strict regulatory expectations, the firms comprising the financial services industry will need to collaborate effectively and to receive ongoing additional guidance to enable it to support customers. 

The close coordination between the FCA, the BoE and HM Treasury is welcome and it is to be expected that the UK authorities will continue to act in concert both domestically and internationally. 

It is too early to tell, at this stage, whether regulators will make fundamental changes to their operational resilience proposals or alter their planned implementation deadlines once the impact of the pandemic begins to subside.


Our cross-practice teams at AG have extensive experience in assisting clients with operational matters including their governance and oversight arrangements, risk and compliance frameworks, outsourcing and third party provider risk and controls assessments. We have also developed a toolkit of services and products to support businesses in achieving and maintaining compliance throughout the full outsourcing lifecycle. 

We will be issuing further briefings on key operational resilience issues and will shortly be delivering a webinar on operational resilience in light of COVID-19. 

If you would like to know more or would like to discuss anything further, please contact.

Key Contacts

Steven Francis

Steven Francis

Partner, Financial Regulation
London, UK

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