Sinara have published another article on Infinite Intelligence about the essential components of operational resilience and the role technology vendors play in helping exchanges prepare for and manage disruptions.
Read the whole article below:
Building operational resilience: A blueprint for exchanges and their members
The financial ecosystem relies on complex technologies, interconnected networks, and the expertise of its people. As a result, the need for robust resilience strategies isn’t just a regulatory requirement but a strategic necessity for market participants.
In this article, we’ll look at three key pillars of operational resilience—software, network, and human, and explore the role of technology vendors in all these areas.
Software resilience and recovery: The heartbeat of modern exchanges
The backbone of any exchange is its software infrastructure. It is here that disparate trading platforms, execution management systems, and high-frequency trading algorithms execute billions of pounds’ worth of transactions each day.
This ever-growing reliance on technology has streamlined operations and created enormous growth, but at the same time introduced new risks and vulnerabilities.
To mitigate these risks, exchanges and their members must invest in software that is not only robust but resilient. This means systems that are designed to be fault-tolerant and capable of graceful handling of high-stress events, whether market volatility, a cyberattack, or hardware failure.
Comprehensive testing is essential in identifying potential weak points and bottlenecks in large software architectures that involve multiple components interacting with each other.
The flip side of software resilience is the ability to recover efficiently from outages or glitches when they do happen.
This requires software that is designed to handle recovery scenarios in the first place, along with effective backup and failover systems, as well as other redundancy measures. Should a software failure occur, rapid incident response plans must be in place to minimise downtime.
Network resilience: Fortifying the backbone
The financial industry is inherently interconnected, relying on a complex web of networks that link exchanges, brokers, clearing houses, and other market participants. In this environment, network resilience is critical in safeguarding the uninterrupted flow of information and financial transactions.
Exchanges and their members must focus on implementing network solutions that are redundant and capable of withstanding external shocks. Diverse connectivity options and geographically dispersed data centres are prerequisites in ensuring uninterrupted access to execution and market data services.
Redundant networks and failover mechanisms can reroute traffic in the event of network failure, minimising disruption and ensuring continuous operation. Regular penetration testing and network stress testing, along with proactive monitoring, intrusion detection, and response mechanisms are all crucial in identifying and rectifying issues.
Human resilience: Preparing for the unpredictable
Operational resilience is not solely dependent on technology but also on the people who operate and manage the systems. Human resilience involves ensuring that individuals have the necessary skills, knowledge, and expertise to respond effectively to operational disruptions.
This requires not only technical training but good approaches to crisis management and decision-making under stress. It is vital that employees understand backup processes and fallback procedures in cases of system downtime, enabling them to carry out these contingency plans when necessary. In a time of crisis, the ability of staff to adapt can make all the difference between a minor setback and a major incident.
Additionally, communication and coordination among various stakeholders are critical during incidents. Exchanges and brokers should establish clear lines of communication and protocols for sharing information during crises. Effective collaboration among teams, both internal and external, is indispensable for a swift and coordinated response.
The role of technology vendors in operational resilience
A good technology vendor is a key partner in achieving this high level of operational resilience for exchanges and brokers. These vendors must take a proactive role in helping their clients prepare for and respond to incidents.
Preparation: Technology vendors should work closely with their clients to conduct risk assessments and mitigate vulnerabilities in their systems. They should contribute to the development of resilience strategies, including software and network redundancy, contingency plans, and disaster recovery procedures.
Incident Response: Vendors should have strong incident response and resolution procedures, and well-trained support professionals who understand the systems and cultivate good working relationships with their clients.
Post-Incident Reviews: Vendors should take part in post-incident reviews, enabling all parties to learn from the experience and further bolster resilience measures.
Testing and Simulation: Vendors should work with their clients in regular testing and simulation of various threat scenarios. This proactive approach can help identify potential weaknesses and areas that need improvement.
Continuous Support and Education: Vendors should provide ongoing support, including training and knowledge sharing, to ensure their clients’ teams are well-prepared for any operational disruptions.
A resilient future
Operational resilience is a critical aspect of maintaining the stability and trustworthiness of financial markets. It encompasses software resilience, network resilience, and human resilience, each of which plays a vital role in ensuring uninterrupted operations.
Technology vendors are integral partners, working hand in hand with market participants to prepare for and respond to incidents. With the right strategies, the financial industry can handle disruption with confidence, safeguarding its vital role in the global economy.
