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T. Rowe Price

CLIENT STORY

Enhancing operational resilience to meet UK regulatory requirements

Around the world, regulators are placing an increased priority on financial services firms’ operational resilience. In the UK, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have published new policies aimed at strengthening firms’ resilience. These policies articulate the importance of UK-based firms identifying and maintaining Important Business Services (IBSs) in times of market or business stress to protect consumers, the market and firms themselves.

T. Rowe Price, a global investment manager with more than $1.5 trillion in assets under management. The asset manager’s leaders wanted to proactively prepare for UK regulatory requirements, while developing a culture of resilience across the firm.

Taking an agile approach, we worked with T. Rowe Price to rapidly build and deliver the operational resilience frameworks, tools and knowledge required to align with principles set out by UK regulators. PA brought a wealth of industry insight, organisational agility expertise, operational resilience, corporate governance and regulatory compliance expertise to streamline compliance and equip internal teams to own this process moving forward.

Key successes

  • microscope

    Identified the Important Business Services (IBSs) subject to UK regulatory requirements

  • list

    Delivered a high-level operating model, governance structures and testing approach

  • schedule

    Used organisational agility delivery principles to prepare the client to meet UK requirements for multiple services in just 14 weeks

Providing financial services in a globally connected world

In addition to financial market events, financial services firms face a wide array of operational risks. These risks include legacy technology systems failures, cloud services outages, cyberattacks, and exposure to third-party incidents, among other issues. Due to the interconnectedness of systems and players these kinds of events are often experienced across the broader market.

Financial services firms must be able to withstand such potentially disruptive events by implementing operational resilience plans in line with regulatory requirements. However, more than 90 per cent of UK Financial Service staff surveyed say their organisation is struggling to keep pace with the rate of change.

T. Rowe Price has continually invested in its business resilience arrangements and has partnered with PA on this journey for over 10 years. We are very happy to have continued our resilience journey with PA as we address and embed the operational resilience policy to meet UK regulatory requirements.

Anthony Gallo,
Global Chief Risk Officer at T. Rowe Price

Taking an agile approach to fulfil challenging regulatory requirements

We have extensive experience working with organisations to help them prepare for regulatory change. For example, we worked with insurer Aviva to prepare their teams for new data privacy rules, and we partnered with the Danish Agricultural Agency as they faced transformative EU reforms.

For T. Rowe Price, we leveraged this experience to deliver process, regulatory and resilience mapping, response and recovery planning, and scenario testing services. Together with T. Rowe Price, we worked through a series of four sprints to ready the firm to meet new UK regulatory requirements. Our diverse team brought a unique mix of capabilities to the table, including asset management, corporate governance, regulatory compliance, organisational agility expertise, operational and IT resilience, business continuity and crisis management, governance framework and operating model expertise.

Agile approaches aren’t commonly used for business continuity and operational resilience initiatives. However, it should be. Financial services firms can use organisational agility principles to increase speed up regulatory response, innovation, identify issues early, equip teams to meet regulatory requirements, and remove cost and waste from compliance processes.

Sundeep Gupta,
Financial services expert, PA

At the outset, we aligned with the client around three common principles – proportionality, international equivalency and evolving existing arrangements. In layman’s language, this meant creating structures that were relevant to T. Rowe’s business model, size, risk appetite and international nature; considering other related regulations; and building on current compliance capabilities rather than starting anew.

In the first sprint, we conducted stakeholder interviews and workshops to understand our client’s existing capabilities and how they were set up in the areas of business continuity, cyber security, third-party risk, disaster recovery and outsourcing. We also explored how T. Rowe Price had structured its senior manager and certification regime (SM&CR), including the SMF24 role responsible for operational resilience. We developed recommendations to meet compliance requirements, confirmed gaps and developed a delivery and remediation plan. During this phase, we gained alignment around the most appropriate, efficient governance structure and operating model that would support programme delivery and then transition to a business-as-usual state. We also agreed on key timelines.

Next, we completed workshops and assessments to determine all important business services (IBSs) affected by the regulations. These services were ones that would cause intolerable harm to the firm, clients or wider market if disrupted. As part of this process, we created key definitions, consistent criteria and tolerances for each service, prioritising them by impact. We also determined roles and responsibilities for the ownership of each IBS. This list of services was presented to the board for sign off. It will be continually reviewed and updated to reflect T. Rowe Price’s most up-to-date priorities.

Then, we ran pilots on three of the IBSs, ultimately expanding to additional services. This process involved mapping dependencies, creating communications and recovery strategies and doing scenario testing. As a result, T. Rowe Price can understand impacts and tolerances. For example, if a third-party is unable to execute for 48 hours, the asset manager knows which services are impacted, to which extent and what the recovery processes should be. If multiple services were impacted, the asset manager could use this structure to prioritise remediation efforts.

Finally, in the fourth sprint we designed and delivered simulations of plausible risk management scenarios, to assess severe and plausible real-world impacts. Risks often expand over time, so it’s important to know how they will affect the business. PA and T. Rowe Price created a testing regime and piloted it with each IBS. These codified testing processes will be used moving forward to test each IBS on a regular basis, ensuring they are evaluated consistently, and any improvements are built back into the wider operational resilience capability.

The iterative approach with agility at the centre has been very helpful with breaking down complex regulatory requirements into a structured process for driving change. PA has also equipped our teams to perform this process moving forward, enabling us to use compliance as a source of competitive advantage.

Jeff Funderburk,
Programme Manager at T. Rowe Price

Gaining clarity that can enable proactive risk management improvements

“We are very impressed with PA’s agility-centred approach to delivering operational resilience and the innovative approach taken. PA’s commitment, industry expertise and regulatory insight have been invaluable in creating proportionate, pragmatic and practical solutions,” says Gallo.

T. Rowe Price will be in a stronger position to address UK regulatory requirements in advance of the deadline. With new organisational agility capabilities, the company can also work productively towards achieving compliance requirements in other geographies such as the US and Asia Pacific. By so doing, T. Rowe Price will reduce risks and business uncertainty globally, while delivering the highly available services its customers rely on.

“As a result of working with PA through an agile process, T. Rowe Price now has a comprehensive understanding and mapping of all of the systems, processes, people, technology and information that enable its IBSs,” says Gallo. “We can use this information to identify and prioritise our risk reduction efforts, increasing the stability of our business and operations in the complex marketplace.”

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Regulators across the world are prioritising operational resilience. Here’s how @PA_Consulting and @TRowePrice are addressing UK regulatory requirements, reducing risk and delivering reliable services for their customers #PowerOfIngenuity

Contact us

Sundeep Gupta

PA operational resilience expert

Adam Stringer

PA business resilience expert