Auditing business continuity management
Performing an audit of business continuity management (BCM) in financial services involves several key steps to ensure the institution's preparedness and resilience in the face of disruptions. While each audit will be unique to the size, complexity, and programs of the financial institution, here are some general best practices to include:
- Planning and scoping: Define the scope of the audit, including the specific BCM processes, systems, and departments to be reviewed. Establish audit objectives, criteria, and the methodology to be used. Detailed FFIEC examination procedures are found here and can be a helpful resource during audit planning. The Institute of Internal Auditors Practice Guide for Business Continuity Management is also a useful guidance.
- Understanding the BCM framework: Review the financial institution’s BCM policies, procedures, and frameworks to understand how BCM is integrated into the overall risk management strategy. Ensure alignment with regulatory requirements and industry best practices. Determine whether the board and senior management promote effective governance of business continuity through defined responsibilities, accountability, and adequate resources to support the program.
- Risk assessment and business impact analysis (BIA): Evaluate the effectiveness of the risk assessment and BIA processes. Verify that the institution has identified critical business functions, assessed potential risks, and determined the impact of disruptions on operations. The BIA helps in understanding the financial and operational impacts of disruptions and sets the stage for developing effective recovery strategies. For instance, a major bank might identify its online banking system as a critical function, requiring specific recovery strategies to ensure minimal downtime.
- Review of BCM plans: Examine the business continuity plans (BCPs) to ensure they are comprehensive, up-to-date, and cover all critical business functions. Assess the adequacy of recovery strategies and procedures for different types of disruptions.
- Testing and exercises: Assess the effectiveness of BCM testing and exercise programs. Verify that regular tests and drills are conducted, involve relevant stakeholders, and that these activities simulate realistic scenarios. Review the results and corrective actions taken based on these exercises.
- Crisis management and communication: Evaluate the institution's crisis management and communication plans. Ensure there are clear protocols for internal and external communication during a disruption, including communication with customers, employees, regulators, and other stakeholders.
- Training and awareness: Review the training and awareness programs to ensure that employees are knowledgeable about their roles and responsibilities in the BCM process. Verify that ongoing training is provided and that it is effective in preparing staff for potential disruptions.
- Review of third-party dependencies: Assess how the institution manages third-party risks related to business continuity. Verify that third-party vendors and partners have their own robust BCM plans and that these are aligned with the institution's requirements.
- Monitoring and continuous improvement: Ensure that there is a process in place for ongoing monitoring and continuous improvement of the BCM program. Review how incidents and near-misses are tracked, analyzed, and used to improve the BCM framework.
- Reporting and documentation: Document findings, conclusions, and recommendations in a detailed audit report. Present the report to senior management and the board, highlighting any gaps or weaknesses and suggesting improvements to enhance the BCM program.
By including these steps into a business continuity management audit, internal auditors can provide a reasonable assessment of the financial institution’s program, ensuring it is robust, effective, and capable of protecting the institution and its customers during disruptions.
Conclusion
For internal auditors in the financial services sector, ensuring the strength of business continuity management is not just a regulatory requirement but a critical component of the organization's risk management strategy. A well-developed and regularly tested BCM enhances operational resilience, maintains customer trust, and ensures compliance with regulatory mandates. By focusing on key components such as risk assessment, recovery strategies, training, and communication, internal auditors can play a pivotal role in safeguarding their organizations against potential disruptions and ensuring a swift recovery when crises occur.
