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2 posts from April 2019

30 April 2019

Operational resilience analytics: Bouncing back from disruption

by Matthew Gela Associate, Data & Analytics in Banking & Capital Markets

by Duncan Scott Director, Banking and Capital Markets Regulatory

Less than a year since the Bank of England, PRA and FCA Discussion Paper on Operational Resilience was issued many firms and financial market infrastructures (FMIs) have made progress in strengthening their operational resilience arrangements. A comprehensive and good practice guide can further support in this endeavour. But many may also find it useful to explore the benefits of developing analytics capability in this area. Analytics could be deployed to anticipate the potential impact of disruptive incidents and evaluate recovery options, in order to maintain continuity of business services.

Because of several issues of service outages across the financial services industry caused by operational disruption, the regulators expect increased focus on identifying and planning for recovery on the assumption that systems and processes which support business services will be disrupted. Avoiding disruption to a particular system or process supporting a business service can be viewed as a contributing factor to operational resilience. But ultimately the business service itself needs to be resilient.

In light of this, firms and FMIs must quantify and test the impact of severe but plausible scenarios on the systems and processes that support delivery of a business service in order to identify vulnerabilities and take optimal recovery action to continue to provide the service. How can firms and FMIs do this?

Let’s look at the example of payments processing. If the servers supporting Straight Through Processing (STP) were running on reduced capacity, this could slow down submission of payment instructions. A firm could use its infrastructure and historical transactions data to model and predict the cascading impact of such an issue on the overall process, including submission of clearing instructions by any applicable cut-off points. Through modelling the overall process, the firm will be able to understand how severely each stage of the process would be impacted, including backlogs that may be created, and what (if any) substitution or workaround options may be available to maintain continuity of the service. Additionally, the load impact on the resources used by any workaround could be measured, as well as how the workaround will help to minimise the impact on critical activities.

As a result, the robustness of the recovery options available to maintain continuity of the business service could be tested. This may provide a demonstrable and efficient way to respond to a disruptive incident, as well as to prioritise and take investment decisions in areas of vulnerability identified by the testing.

The regulators continue to reiterate and develop their supervisory approach towards operational resilience. The Bank of England and PRA have stressed that operational resilience is more important than ever as more consumers are accessing business services digitally, operational failures become visible quicker with social media and the increase of cyber-attacks. The FCA has taken a strong stance against firms failing to protect consumers from foreseeable risks. In addition, MPs in the Treasury Select Committee have launched an inquiry into the ability of financial services companies to prevent and respond to IT failures.

With rapid developments in the availability of lower cost technologies, including interactive dashboards, analytics capability in this area is far more accessible than before. Such technologies can be used to dynamically bring together disparate datasets, such as on the performance and capacity of systems, premises and people. This could provide the tools necessary to model and measure the impact of disruptive incidents and workarounds. Therefore, firms and FMIs not only have the opportunity to meet regulatory and public expectations, but also take a lead role in demonstrating an innovative and robust approach towards operational resilience.

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If you would like to discuss these issues, or the impact of emerging technology or data and analytics on your industry, then contact our Data & Analytics team

Related reading:

by Matthew Gela Associate, Data & Analytics in Banking & Capital Markets

by Duncan Scott Director, Banking and Capital Markets Regulatory

15 April 2019

Three trends for Smart Cities

by NSN Murty Partner & Leader, Smart Cities, PwC India

by Peter D. Raymond Global Advisory Leader, Capital Projects & Infrastructure, PwC US

by Gary Sharkey Global Sustainability Network Driver

The development of smart cities – enabled and powered by digital technologies – is set to be one of the crowning achievements of societies worldwide in the 21st century. In November, PwC joined over 21,000 visitors from 146 countries in Barcelona at the Smart City Expo World Congress, where we had the opportunity to view "smart" innovations ranging from city management apps to smart mobility options.

Over the last few months, we’ve used our past experience, the information we learned during sessions at the event, and conversations with clients to identify three global trends for Smart Cities that are top-of-mind for many.

1. Multi-directional data and information flow is essential to Smart City development

Cities have a vast amount of accumulated data - from demographic information about their citizens, to records detailing public service usage, to data about physical infrastructure. Additionally, private sector city partners will have data available from various endeavours. Separately, but especially in combination, these public and private data streams can be hugely beneficial and are essential to Smart City design, as many of the foundational elements of Smart Cities, such as the Internet of Things discussed below, require data. However, this abundance of data presents potential challenges, including data overload, interoperability issues, and management of open data.

2. IoT is regularly serving as the backbone hardware for smart city developments

Emerging technologies such as IoT are becoming increasingly popular and driving many smart city initiatives, while also evolving in the way they are used. IoT creates unique, user-centric experiences while also improving efficiency and sustainability in communities. The convergence of IoT with AI has also offered strong motivation for cities to evolve. Adaptive streetlights or traffic lights are a good example of this; they depend on IoT in lights (and cars) and then AI to decide when and how the lights function. This can have benefits such as improved safety, improved traffic management, and energy savings.

We’ve also noticed a tendency for developers to integrate “smart” city elements into large-scale public infrastructure programs. There are many instances of this blending of physical and digital: current examples include the integration of "smart city” elements into large-scale developments including sports stadia, art spaces, seaports and leisure developments. As with the availability of data, however, these technologies also present emerging challenges that cities and companies must overcome, such as the lack of IoT standards.

3. Effective Smart City Development will require participation from both public and private sectors

Smart City Expo World Congress saw significant participation from private sector software providers and system integrators demonstrating the power of data integration and citizen-centric apps. This presence is inline with our past and present experience: myriad private sector developers and technology providers are eager to collaborate with city authorities and tap into the opportunities that smart city services present. Private sector developers can fulfill a useful function as accelerators and laboratories for new types of smart environments. Private and public sectors must determine the most effective ways to work together based on their specific experiences. Additionally, individuals’ roles are evolving to meet the “new normal” for private and public sector interactions.

Each of these themes will likely be prevalent as cities become “smarter.” We continue to work with our alliance partner Microsoft to develop technology solutions to help in this initiative and have been engaging in great post-event conversations around how to continue to advance Smart City development.  We look forward to future conversations.

If you would like to discuss these issues, or the impact of emerging technology or data and analytics on your industry, then contact our Data & Analytics team.

For more information on PwC’s Smart City approach, visit https://www.pwc.com/smartcities.

Related reading:

by NSN Murty Partner & Leader, Smart Cities, PwC India

by Peter D. Raymond Global Advisory Leader, Capital Projects & Infrastructure, PwC US

by Gary Sharkey Global Sustainability Network Driver