With just four months left until the FCA’s Operational Resilience legislation deadline, a study from Parseq reveals that nearly a third of financial institutions are not fully prepared to meet the upcoming requirements.
This legislation is designed to enhance the robustness of the UK’s financial sector by ensuring that organisations can effectively prevent and manage operational disruptions that could harm consumers or destabilise the financial system.
The research, conducted by Censuswide for Parseq, found that only 69% of surveyed financial leaders are ‘very confident’ in their internal systems, processes, and procedures aligning with the new legislation by the 31 March 2025 deadline.
Interestingly, the confidence levels are higher, at 74%, when it comes to third-party suppliers meeting the new standards. This suggests a strong reliance on outsourcing partners, who are also expected to stay within the impact tolerances set by the legislation for crucial business services.
Confidence levels varied significantly depending on the size of the institution. Among leaders at large financial entities with over 250 employees, 88% felt very confident in their compliance capabilities, and 94% were assured of their outsourcing partners’ alignment with the regulations. In contrast, only 58% of leaders at financial SMEs expressed high confidence in their own compliance, with a slightly higher 62% for their third-party suppliers.
Parseq’s Director of Client Services and Growth, Gordon MacKinnon, highlighted a specific area of concern: “Financial institutions raced to enhance their IT systems when the Operational Resilience guidelines were published. When the audits start, we suspect the FCA will find greater room for improvement in back-office functions that rely more heavily on people, such as inbound customer communications, contact centre operations and cheque processing.” He added that larger institutions are generally better equipped, often benefiting from robust third-party systems with stringent service level agreements. Smaller entities, however, might find themselves more vulnerable due to their in-house management of these crucial back-office functions.
This disparity points to potential challenges for smaller financial institutions, which may need to invest significantly in bolstering their systems to avoid penalties and ensure compliance.
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