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The nuclear option

30 January 2006  |  3573 views  |  0 Source: Mike Brennan, CSC

What should the capital markets be thinking as the war on terror escalates to the nuclear level asks CSC's Mike Brennan

The unthinkable has happened. Some countries involved in the war on terror are either talking about using the nuclear weapons they have or rushing to build them.

On one side, the leader of Iran shares his dream of destroying Israel while actively pursuing nuclear capability. On the other side, Israel is closely watching Iran and has a history of dealing with such threats. No doubt as to where this is heading.

The president of France is so concerned about the escalation that last week he told the terrorist community … don’t even think about nuking us because we’ll nuke you right back and we can do it better. Well, his actual quote was:

"Those who would consider using, in one way or another, weapons of mass destruction must understand that they would lay themselves open to a firm and adapted response on our part.

This response could be a conventional one. It could also be of a different kind".

Additionally, the most wanted terrorist in the world reappeared this month to tell the United States that they can expect a visit.

Pretty scary stuff.

What does this mean for the capital markets?

Industry participants must understand that anything, no matter how terrible, is possible and build their continuity plans accordingly.

It is critical for the industry to understand that the traditional definition of Business Continuity Planning - which takes place after business has been interrupted - no longer applies. The most effective Business Continuity Planning begins before business is interrupted, and is based on a cultural and organisational model driven to close out as much business activity as possible on the day it occurs. Specifically, all processing, reconciling, matching and any other functions that can be executed “same day” should be.

The good news is that industry utilities are in place to support the majority of this activity; the bad news is that they can‘t support what they don’t receive.

Every capital markets organisation should transform their operating model into a “same day” environment. Waiting for external drivers, like regulatory mandates or industry-wide settlement date changes is a mistake. They are years away, if they happen at all.

The primary difference between a “same day” and “next day” operating environment is the day after business is interrupted a “same day” environment allows an organisation to focus on how to support future business, not piece together past activity. This will be critical in determining those organisations that can overcome business interruption and those that can’t.

While there may be nothing an organisation can do to prevent business interruptions, there is much that can be done to limit the damage. The challenge is to address it beforehand.

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