Scenario Planning and Testing for Success
Scenario planning and testing for success
As we have moved beyond the PRA deadline for operational resilience of 31st March 2025, this paper analyses the current operational resilience and recovery and resolution priorities of financial services firms specifically regarding best practice scenario testing.
Where are we now, and what does the future look like?
Most banks have been laser-focused on meeting the PRA’s SS21 requirements (PRA, 2021) ahead of the March 2025 deadline. A significant part of that has been testing the stability of their Important Business Services (IBS) and making sure those services can stay within impact tolerances during disruptions. Firms are also looking at lessons from past incidents to shape
future testing and are starting to examine the resilience of third-party providers tied to each IBS, including what their continuity plans look like.
Looking ahead, joint third-party testing is expected to play a much bigger role in operational resilience. There’s growing interest in how to test key direct suppliers, but also fourth and even fifth level parties. Those deeper layers in the supply chain that business service owners might not have direct visibility over.
Another shift on the horizon is moving away from purely theoretical tests toward more data-driven methods. Advanced technology like Artificial Intelligence is starting to play a part too (see Be UK’s blog on Digital Twins for more information in this – Link). Lastly, firms are increasingly exploring compounding scenarios, where a failure in one IBS sets off a chain reaction across others.(Increasing reliance on complex technology leaves banks vulnerable, 2024).
From a recovery and resolution angle, firms are focusing on maintaining strong, well-tested response capabilities. They’re making sure the scenarios they run are severe enough to push the firm to the point of non-viability, with testing happening at least annually or when needed. The spotlight will be on testing whether continuity and restructuring plans are using severe but plausible scenarios. This includes running fire drills to make sure senior decision-makers are familiar with the key documents, the data they’ll need, and how different parts of the business are connected, especially across legal or operational barriers. (BoE, 2024).
Scenario testing insights from our recent roundtable
(Be UK Scenario Testing Roundtable)
Be UK recently hosted a roundtable on scenario testing where we ran a poll to find out what challenges firms are facing with scenario testing and what tools they’re already using.
Our first question asked whether financial services firms use sophisticated scenario testing, specifically, scenarios that hit multiple risk areas at once. Most do: 70% said they use complex, compounding scenarios to see how a breakdown in a key business service could impact other parts of their operations.
One of the more surprising results from our poll came when we asked firms which tools they include in their scenario testing approach. Using real-time, digitised data and AI ranked the lowest, with 86% of firms still using desktop testing. Our speaker touched on this during the discussion, stressing how crucial data digitisation is. Financial services firms are complex, especially when it comes to technology and data. To understand how different failures might play out, or how risk shifts over time, you need strong data foundation and the right tools to work with them. It’s not a magic fix, but there’s real potential to use advanced models or even digital twins to simulate operational disruptions. As always, the quality of your data will either open doors, or hold you back.
The poll also highlighted some clear pain points firms are facing with scenario testing. Limited diversity in testing methods, 56% of respondents flagged this. 50% said their testing is siloed across teams. Both challenges point to the need for better collaboration. Bringing teams together early in the process can lead to stronger scenario design, clearer risk assumptions, and more useful insights.
Another key step is encouraging innovation in how scenarios are built and tested. Relying on the same playbook won’t cut it, firms should experiment with different types of stressors or even borrow techniques from other industries. A more creative, data-driven approach can help uncover vulnerabilities that traditional methods might miss.
It’s clear from our roundtable that while scenario testing is firmly on the agenda, there’s still a long way to go in how it’s approached. Firms are recognising the importance of testing complex scenarios, but many are held back by outdated tools and siloed ways of working. Moving forward, the focus should be on better collaboration, embracing innovation, and building the data capabilities needed to truly understand operational risk. As the regulatory and threat landscape evolves, so too must the way we test for resilience.
Bibliography
BoE. (2024). Resolvability assessment of major UK banks: 2024. Retrieved from Bank of England: https://www.bankofengland.co.uk/financial-stability/resolution/resolvability-assessment-framework/resovability-assessment-of-major-uk-banks-2024?
Increasing reliance on complex technology leaves banks vulnerable. (2024, April). Retrieved from Financial Times: https://www.ft.com/content/c148d46f-8c6f-487e-b8d7-8e7b9eddc324?
PRA. (2021). SS1/21 Operational resilience: Impact tolerances for important business services. London: PRA Retrieved from Bank of England: SS1/21 Operational resilience: Impact tolerances for important business services | Bank of England
