The Trade Lifecycle: Behind the Scenes of the Trading Process

25

Business Continuity Planning

25.1 WHAT IS BUSINESS CONTINUITY PLANNING?

Should a major event occur that seriously disrupts the business of a financial entity, procedures need to be activated to manage the situation and reduce the damage caused. These procedures are known as business continuity planning (BCP) and sometimes disaster recovery, although the latter term generally refers to the IT aspects of business continuity.

Obviously, it is too late to wait for the event to actually happen, so organisations have a person or team responsible for drawing up plans and testing them. In fact it has now become a regulatory requirement that investment banks and other finance houses have in place a plan for business continuity, which can be inspected and approved. This is to prevent damage to one institution spreading to others and destroying confidence in the financial system as a whole.

25.2 WHY IS IT IMPORTANT?

There is a joke in many financial entities about disaster recovery, that they are good at the disaster, but not so good at the recovery - unfortunately it is not always just a joke. BCP requires a deep level of planning and extensive knowledge of the trade processes at the heart of most financial businesses. If disaster strikes, the trades and asset holdings of the institution are still extant and require all the standard processes to continue as close to normally as possible.

If there is no business continuity then:

• the trades themselves may start losing money;

• risks ...