Points for Attention and Key Considerations
multiple scenario testing exercises
Firms will need to plan to make multiple scenario testing exercises ahead of the first Self-Assessment ready for Board sign-off.
Firms should allow plenty of time to conduct scenario tests and start early. When prioritising important business services for testing, firms should consider the relative risk they pose to financial stability, safety and soundness.
As impact tolerances are set on the assumption that disruptions will occur, firms are not expected to devote too much time to considering the relative probability of incidents occurring.
A testing plan should include realistic assumptions and evolve as the firm learns from previous testing. The severity of scenarios used by firms for their testing could be varied by increasing the number or type of resources unavailable for delivering the important business service, or extending the period for which a particular resource is unavailable. The mapping work will be useful in informing how firms’ scenarios could be made more difficult.
When developing a testing plan, firms may wish to consider the following:
Firms should take a pragmatic approach to testing, focusing on insights from the exercise and not dedicate disproportionate resource to quantifying every permutation.
existing scenario libraries
Firms may be able to leverage any previous incidents or near misses and existing scenario libraries from other activities such as operational risk, ICAAP, stress testing or business continuity. Those scenarios can be enriched and tailored to cover firm-specific important business services using the elements of potential impact from the mapping exercise (people, processes, technology, facilities and information).
This being said, in many ways, scenario testing is different from business continuity (BCP), disaster recovery (DRP) or financial stress testing. BCP or DRP testing: