Continuity: Considerations to keep your FSP running smoothly
There are many faces of risk for FSPs (similarly any business owners) from personnel to property, information and data, operational liability, interruption, and legal risks, among others. Continuity risk is another critical area to address.
Continuity risk defines any event that renders your business un-operational. Fortunately, these potential damages can be reduced through proper planning.
Fore armed is forewarned
It’s important to do an assessment of what could happen and why such events would take place. Knowing the possible consequences or outcomes before they come to be, allows you to be prepared. You can calculate the cost and magnitude of the results beforehand, ensuring you are able to manage the true expenses that come with the risks.
A simple calculation of impact and probability
To determine your net readiness factor (NRF), calculate the consequences of the incident by the probability of the occurrence, minus the controls in place to mitigate the fallout.
Implementing practical measures to reduce risk is important to avoid damage and minimise consequences. You might, for example, plan around what to do in the case of a breach and how to recover from that. Some risks cannot be eliminated entirely, but wherever possible operations need to be able to continue in worst case scenario.
Follow ups, learnings, and legislation
Some risks will come to fruition, as real situations facing you head on. Once the dust has settled and as much repair is done as possible, part of moving forward successfully should include an assessment of what went wrong and why. Were any predications accurate; were there predictions of the risk in the first place? Realigning your risk controls may be required.
FAIS legislation requires key risks to be addressed to ensure your client impact is minimal and that continuity is in place.
Among the common risks for IFAs are advice risk, inappropriate conduct, the lack of a Key Individual (KI), bad processes or file records’ in place, and cyber risks, to name a few. Future-proofing your practice means facing further risks such as technology advancement getting ahead of you, death and disability, and thus the continuity of your business.
In the time of Covid-19, uncertainty has never been clearer. We are only certain that life can change very suddenly, but we have also seen that those who are prepared, end up better off. While the world may be normalising or getting used to how things are, it’s as crucial as ever to have a continuity plan in place. This is true even if you are struggling to see ahead. You might consider reserving a KI or putting a buy and sell agreement or business/FSP transfer in place.
At the end of the day, your fate has little to do with risk. Almost all risks are caused by human action, so can be somewhat influenced. It’s the unidentified risks that cannot be managed as easily, making risk management everybody’s game in your FSP.
Plan ahead by assessing every aspect of your business and preparing wherever possible. This is particularly important for the risks you can control, so that if the ones you can’t roll around, contingencies will be in place, which through proper thought, will include a successful risk management plan to see you through.