Appendix A: Examination Procedures

Examination Objective

These examination procedures (also known as the work program) are intended to assist examiners in determining the quality and effectiveness of the business continuity process on an enterprise-wide basis or across a particular line of business. Additionally, these procedures assist examiners in evaluating whether business continuity testing demonstrates the entity’s ability to meet its business continuity objectives including management’s ability to recover, resume, and maintain operations after disruptions, ranging from minor outages to full-scale disasters. Examiners are not limited by the examination procedures presented here and may choose to use only certain components of the work program based on the size, complexity, and nature of the entity’s business. Depending on the examination objectives, a line of business can be selected to sample how the entity’s continuity planning or testing processes work individually or for a particular business function or process.

Objective 1: Determine the appropriate scope and objectives for the examination.
  1. Review past reports for outstanding issues or previous problems. Consider the following:
    1. Regulatory reports of examination.
    2. Internal and external audit reports.
    3. Reports by independent risk management.
    4. Business continuity tests.
    5. Regulatory, audit, and business continuity reports on third-party service providers.
  2. Review management’s response to issues identified during or subsequent to the last examination. Consider the following:
    1. Adequacy and timing of corrective action.
    2. Resolution of root causes rather than symptoms.
    3. Status of uncorrected issues.
    4. Retesting to validate corrective action.
  3. Interview management and review responses to pre-examination information requests to identify changes to technology infrastructure or new products and services that could affect business resilience. Consider the following:
    1. Products or services delivered to either internal or external users.
    2. Network topology or diagram including changes to configuration or components and all internal and external connections.
    3. Hardware and software inventories.
    4. Loss, addition, or change in duties of key personnel.
    5. Third-party service providers and software vendor listings.
    6. Changes to internal business processes.
    7. Changes based on industry changes or threat intelligence.
  4. Review newly identified threats and vulnerabilities to the continuity of operations. Consider the following:
    1. Technology and security vulnerabilities.
    2. Internally identified threats.
    3. Externally identified threats (e.g., cybersecurity alerts, pandemic alerts, or emergency warnings published by information-sharing organizations and government agencies).
Objective 2: Determine whether the board and senior management promote effective governance of business continuity through defined responsibilities, accountability, and adequate resources to support the program. (II.A, “Board and Senior Management Responsibilities”)
  1. Determine whether business continuity policies and critical business procedures are:
    1. Up-to-date and reflective of the current business environment.
    2. Communicated effectively throughout the entity.
    3. Available during adverse events.
    4. Securely maintained.
  2. Determine whether the board and senior management provide leadership when overseeing business continuity, including:
    1. Evaluating continuity risk.
    2. Setting short- and long-term continuity objectives.
    3. Adopting appropriate policies and procedures.
    4. Evaluating continuity performance.
    5. Adjusting programs and operations in response to test results and actual events.
  3. Determine whether management strengthens resilience through the following:
    1. Assessing continuity risk.
    2. Resilience planning.
    3. Testing business continuity plans.
    4. Incorporating lessons learned from testing and events.
    5. Considering resilience in business functions and the design of existing operations and new products and services.
  4. Determine whether board oversight includes the following:
    1. Assigning business continuity responsibility and accountability.
    2. Allocating resources to business continuity (e.g., personnel, time, budget, and training).
    3. Aligning BCM with business strategy and risk appetite.
    4. Understanding business continuity risks and adopting appropriate policies and plans to manage events.
    5. Understanding business continuity operating results and performance.
    6. Providing a credible challenge to management responsible for the business continuity process (e.g., the board minutes provide evidence of active discussions).
    7. Establishing a provision for management intervention if timeliness for corrective action is not met.
  5. Determine whether management oversight of business continuity includes the following:
    1. Defining business continuity roles, responsibilities, and succession plans.
    2. Allocating knowledgeable personnel and sufficient financial resources.
    3. Validating that personnel understand their business continuity roles.
    4. Establishing measurable goals against which business continuity performance is assessed.
    5. Designing and implementing a business continuity exercise strategy.
    6. Confirming that exercises, tests, and training are comprehensive and consistent with the exercise strategy.
    7. Resolving weaknesses identified in exercises, tests, and training.
    8. Meeting regularly to discuss policy changes, testing plans, and training.
    9. Assessing and updating business continuity strategies and plans to reflect the current business conditions and operating environment for continuous improvement.
    10. Aligning plans between business units across the enterprise.
    11. Coordinating plans and responses with external entities.
Objective 3: Determine whether the board and senior management engage audit or other independent review functions to review and validate the design and operating effectiveness of the BCM program. (II.B, “Audit”)
  1. Determine whether the board and senior management have engaged audit (or an independent review) to validate the design effectiveness of the business continuity program and whether controls are operating effectively.
  2. Determine whether audit reports to the board and provides an assessment of management’s ability to manage and control risks related to continuity and resilience.
  3. Determine whether audit leverages SOC reports and other external artifacts from third-party service providers, as appropriate.
  4. Determine whether the board or management validates that the auditor is qualified to carry out the review and is independent of the business continuity or related functions.
  5. Evaluate the audit coverage of business continuity, whether through a general controls audit, during audits of business lines, or as a stand-alone business continuity audit. Audit coverage should include the following:
    1. The reasonableness and comprehensiveness of the BIA and business continuity risk assessment(s).
    2. The reliability, adequacy, and effectiveness of continuity and resilience controls.
    3. The effectiveness of risk mitigation efforts.
    4. Whether test plans achieve their stated objectives based on reasonable assumptions.
    5. Audit monitoring of exercises and tests, reviewing test plans and results, and verifying that any issues are identified and appropriately escalated.
    6. Assessment of the business continuity program effectiveness.
Objective 4: Determine whether management developed an appropriate and repeatable BIA process that identifies all business functions and prioritizes them in order of criticality, analyzes related interdependencies, and assesses a disruption’s impact. (III.A, “Business Impact Analysis”)
  1. Determine the process through which management inventories business functions. Management may use the following artifacts to identify the functions:
    1. Organizational charts.
    2. Work flows (also called process maps).
    3. Interview notes.
    4. Network diagrams/topologies.
    5. Data flow diagrams.
  2. Determine whether management inventoried the critical assets and infrastructure upon which business functions depend, including the identification of single points of failure. Critical assets and infrastructure may include the following:
    1. People.
    2. Hardware.
    3. Software.
    4. Cash reserves.
    5. Supporting activities (e.g., technology support, payroll, contracting).
    6. Supporting software (e.g., email, office productivity suites).
    7. Network connectivity.
    8. Communication lines.
    9. Facilities.
    10. Utilities.
    11. Infrastructure and services provided by third-party service providers.
  3. Determine whether the interdependency analysis includes the following:
    1. Internal systems and business functions, including services, production processes, hardware, software, and application programming interfaces, data, and vital records.
    2. Third-party service providers, key suppliers, and business partners.
    3. Telecommunications single points of failure.
    4. Power single points of failure.
  4. Review the BIA to determine whether the prioritization of business functions is reasonable. Consider management’s ability to do the following:
    1. Determine the operational and financial impacts of a disruption.
    2. Aggregate loss impacts and determine a rating scale to indicate impact severity.
    3. Reconcile BIA and risk assessment results with prioritization and document whether the reconcilement is adequate.
  5. Determine whether the BIA produces sufficient information to estimate the following:
    1. Recovery point objectives (RPO).
    2. Recovery time objectives (RTO).
    3. Maximum tolerable downtime (MTD).
Objective 5: Determine whether management conducts a risk assessment sufficient to evaluate the likelihood and impact of potential disruptions and events. (III.B, “Risk Assessment”)
  1. Review risk assessment(s) to determine whether management has identified all reasonably foreseeable hazards and threats to the continuity and resilience of the entity. Examples of risks can include:
    1. Natural:
      • Flood, earthquake, hurricane, tornado, and other weather events.
    2. Technological:
      • Technological: Malware, cyberattack, and hardware and software failure.
      • Operational: Critical infrastructure disruption (e.g., transportation and water systems).
    3. Adversarial or human-caused:
      • Personnel: Strike, pandemic, and malicious insider.
      • Social: Terrorism, vandalism, looting, riots, and protests.
    4. Combination:
      • Facility: Fire, power outage, and loss of access.
      • Geographic-related: Proximity to railroad or highways used for transport of hazardous materials, proximity to airports, traffic difficulties, and other issues.
      • Third-party: Services concentrated in a limited number of third-party service providers.
  2. Determine whether management identifies BCM risks and coordinates risk identification efforts throughout the entity to identify systemic threats.
    1. Determine whether management identifies and inventories the following:
      • Internal and external assets.
      • Types of threats and hazards.
      • Existing controls.
    2. Verify that the risk assessment includes the identification of cybersecurity risks and results of information security risk assessments.
    3. Assess whether management obtains information about hazards and threats from external sources.
    4. Determine whether management considers threat intelligence in risk identification efforts.
  3. Ascertain whether management identifies interconnectivity points between the entity and its third-party service providers, as well as interconnectivity between other entities and their third-party service providers (i.e., supply chain).
  4. Determine whether the risk assessment includes the impact and likelihood of potential disruptive events, including worst-case scenarios.
  5. Determine whether management identifies and analyzes gaps between the entity’s risk exposure and the risk appetite, and documents any controls implemented to mitigate the residual risk.
Objective 6: Determine whether the entity’s risk management strategies are designed to achieve resilience. (IV.A, “Resilience”)
  1. Verify that management has evaluated strategies and resource needs and allocates appropriate resources to achieve resilience:
    1. Appropriate personnel and skillsets to carry out the functions.
    2. Time to identify and implement solutions.
    3. Budget to accomplish resilience goals and objectives.
  2. Determine whether management has implemented physical resilience measures that:
    1. Establish redundant communications between branches and data centers.
    2. Identify multiple power sources.
    3. Geographically diversify key entity locations.
  3. Determine whether management has implemented data and cyber resilience measures that:
    1. Maintain confidentiality, integrity, and availability for backup, replication, and production environments.
    2. Implement appropriate backups and sufficient documentation and retention periods for each iteration of data backup.
    3. Periodically reassess backup and recovery strategies as technology and threats change.
    4. Maintain an accessible, off-site repository of software, configuration settings, and related documentation.
    5. Establish procedures to recover critical networks and systems, including:
      • Backup types (physical or virtual).
      • Backup levels (full, incremental, or differential).
      • Update and retention cycle frequencies.
      • Software and hardware compatibility reviews.
      • Data transmission controls.
      • Data repository maintenance.
    6. Protect offline data backups from destructive malware that may corrupt production and online backup versions of data.
  4. Determine whether management documented and implemented, as appropriate, the following resilience measures for personnel:
    1. Staffing and skills needed to operate critical functions related to business continuity.
    2. Lodging arrangements for displaced employees and their families.
    3. Basic necessities and services for displaced employees, including water, food, clothing, childcare, and transportation.
    4. On-site medical support and mobile command centers.
    5. Secure telecommunication options if employees work from an alternate location.
    6. Designated emergency personnel, including critical business process-level employees (i.e., those necessary to ensure all critical business operations function appropriately).
  5. Determine whether management documented and implemented, as appropriate, the following resilience measures for third-party service providers:
    1. Considered disruptive events that threaten the operational resilience and viability of the entity’s third-party service provider.
    2. Assessed the entity’s immediate or short-term space, systems, and personnel capacity to assume or transfer failed operations.
    3. Assessed critical third-party service providers’ susceptibility to multiple event scenarios.
    4. Reviewed third-party service provider’s resilience capabilities, including available test and SOC reports.
    5. Verified that SLAs with third-party service providers align with the entity’s recovery objectives.
    6. Established plans for the resilience of third-party service providers supporting critical operations.
  6. Determine whether management documented and implemented, as appropriate, the following resilience measures for telecommunications:
    1. Identifying and mitigating single points of failure across the entity’s infrastructure.
    2. Developing and maintaining a plan to address an outage in the telecommunications lines with its primary third-party service providers.
    3. Establishing redundant telecommunications links with each of the entity’s third-party service providers through a contractual arrangement that allows either party to switch its connection to an alternate communication path.
    4. Reviewing the entity’s third-party service providers’ plans and determining whether critical services can be restored within time frames acceptable to the entity.
    5. Developing guidelines, commensurate with the entity’s size, complexity, and risk profile, to diversify connections to mitigate the risk of a telecommunications failure.
    6. Assessing the communications technology that bridges the transmission distance between the telecommunications service provider and the entity for single points of failure.
    7. Monitoring relationships with telecommunications providers to manage risks.
    8. Evaluating communications and resilience needs to ensure branch communications.
    9. Inquiring about the physical paths used by telecommunications providers and verifying that system redundancies have been properly implemented.
  7. Determine whether management considers the following as part of the entity’s power resilience strategies:
    1. Alternate energy sources (e.g., generators and multiple power grids).
    2. Fuel requirements, both for fuel on-hand and contracts with suppliers for deliveries during events.
    3. Continued maintenance of generators.
    4. Testing of generators.
  8. Verify that BCM activities align with the entity’s change management process.
Objective 7: Determine whether the entity’s BCM includes communication protocols. (IV.B, “Communications”)
  1. Determine whether management considers, plans for, and prepares multiple mechanisms to communicate with personnel and other stakeholders while maintaining appropriate controls to safeguard customer information. Other stakeholders could include:
    1. Regulatory agencies (federal and state).
    2. Emergency responders.
    3. Law enforcement.
    4. Financial sector trade associations.
    5. Information-sharing entities (e.g., FS-ISAC).
Objective 8: Assess the appropriateness of the entity’s enterprise-wide BCP. (V, “Business Continuity Plan”)
  1. Verify that management implemented a comprehensive BCP that is reflective of the entity’s risk environment. The BCP should outline the following:
    1. Roles, responsibilities, and required skills for entity personnel and third-party service providers.
    2. Solutions to various types of foreseeable disruptions, including those emanating from cyber threats.
    3. Escalation thresholds.
    4. Immediate steps to protect personnel and customers and minimize damage.
    5. Prioritization and procedures to recover functions, services, and processes.
    6. Critical information protection (e.g., physical, electronic, hybrid, and use of off-site storage).
    7. Logistical arrangements (e.g., housing, transportation, or food) for personnel at the recovery locations.
    8. Network equipment, connectivity, and communication needs, including entity-owned and personal mobile devices.
    9. Personnel at alternate sites, including arrangements for those permanently located at the alternate facility.
    10. Scope and frequency of testing.
    11. Resumption of a normalized state for business processes.
  2. If management outsources the BCP’s development, verify that management maintains oversight and ownership of the BCP.
    1. Determine whether management verified the third-party service provider’s qualifications and expertise.
    2. Verify that entity management worked with the third-party service provider to design executable and viable strategies.
    3. Verify that the plan reflects the entity’s current products, business processes, and third-party service providers.
    4. Determine whether roles and responsibilities reflect the entity’s current organizational structure.
  3. Determine whether the BCP includes event management procedures that detail reasonably foreseeable event types, and those procedures include threshold metrics and response methods.
    1. Verify that procedures explain how to report an event to management and the situations that warrant notification.
    2. Determine whether management (either an individual or team) has implemented procedures to communicate with both internal and external stakeholders.
    3. Verify that event management processes include event response procedures that are appropriate to the event.
  4. Assess management’s protocols for operations continuity and system recovery. Verify that procedures are clear, concise, accessible, and can be implemented in an emergency. Verify the BCP includes procedures for the following:
    1. Manual steps for critical functions, as applicable.
    2. Alternate identity verification methods.
    3. Fraud identification and suspicious activity reporting.
    4. Other procedures as applicable. Examples may include:
      • Addressing customer service requests during downtime.
      • Tracking daily transactions.
      • Reconciling general ledger accounts.
      • Documenting operational tasks.
      • Posting entries after system recovery.
      • Maintaining backup records to provide customer account information (account numbers, customer names, addresses, account status, and account balances).
  5. Verify that the BCP lists alternatives for core operations, facilities, infrastructure systems, suppliers, utilities, interdependent business partners, and key personnel.
    1. Verify that the BCP includes site relocation for short-, medium-, and long-term scenarios.
    2. Determine whether management considers scalability.
    3. Verify that recovery alternatives can accommodate the services and processing capabilities affecting critical operations, including:
      • Core processing.
      • Check processing and imaging.
      • Commercial cash management.
      • Mailing, faxing, and printing.
      • Customer identification.
      • Data center activities.
  6. Verify that the BCP includes procedures for coordination with the first responders and local and state government agencies, when appropriate.
  7. Verify that the BCP includes procedures to establish an alternate physical location(s) where personnel and customers can go to conduct business, if appropriate.
  8. Determine whether the BCP addresses alternate arrangements in the event payment systems fail (e.g., ATMs, funds transfers, electronic banking, remote deposit capture, mobile capabilities).
    1. Determine whether the BCP addresses processes for retrieving and transmitting transactions when payment systems are disrupted (e.g., manual procedures for calling in or faxing wire or automated clearing house requests to correspondent banks; mitigating strategies for web-based systems; or third-party software used to perform transactions).
    2. Determine whether management verifies that redundant electronic payment systems and equipment (e.g., tokens and routers) are included at recovery sites for activation and that documentation is maintained for timely posting of entries when systems are recovered.
    3. Determine whether instant issue cards are utilized and card company security procedures are implemented to limit potential fraud.
  9. Verify that the BCP addresses the entity's cash management requirements. Procedures may include:
    1. Pre-established cash delivery arrangements.
    2. Plans for increases in branch traffic when ATMs are unavailable.
    3. Plans for the entity’s operational cash needs.
    4. Temporary purchase authority guidelines.
    5. Expense reimbursement options for personnel.
    6. Higher-limit credit cards or separate checking accounts with designated individuals who can sign checks in emergency situations.
  10. Determine whether management established an incident response process. As part of incident management planning, determine whether management does the following:
    1. Aligns incident response procedures with other related processes (e.g., cybersecurity, network operations, and physical security).
    2. Considers incident response procedures during the development of the business continuity strategy.
    3. Leverages routine processes (e.g., vulnerability management and network monitoring) to anticipate potential incidents, including cyber incidents.
  11. Verify that management developed a coordinated disaster recovery strategy for data centers, networks, servers, storage, service monitoring, user support, and related software. Verify that procedures address the following:
    1. Security controls and protocols, including physical and logical.
    2. Procedures for restoring backlogged activity or lost transactions to identify how transaction records will be brought current within expected recovery time frames.
    3. Instructions to access the repository of critical information when the primary facility is unavailable.
  12. Verify whether management designates key personnel from applicable departments to act during a crisis or emergency situation. Key personnel may include:
    1. Senior management for leadership.
    2. Facilities management for safety and physical security.
    3. Human resources for personnel issues and travel.
    4. Media relations for managing communications.
    5. Finance and accounting for funds disbursement and financial decisions, including unanticipated expenses.
    6. Legal and compliance for legal and regulatory concerns.
    7. IT, including information security, and operations for specific tactical responses.
  13. Determine whether management established a crisis or emergency management process. Verify whether the BCP addresses the following:
    1. Coordination with regulatory agencies, local and state officials, law enforcement, and first responders.
    2. Disruptions not confined to a single event, facility, or geographic area.
    3. Simultaneous disruptions of telecommunications and electronic messaging, including between the entity and third-party service providers.
    4. Crisis or emergency management communication protocols, including the designation of a spokesperson(s) to communicate with the news media, as appropriate.
Objective 9: Determine whether the BCM program includes training and awareness to educate stakeholders about the entity’s continuity objectives and BCM goals. (VI, “Training”)
  1. Verify that the training program aligns with the entity’s BCM strategy. Determine whether management does the following:
    1. Inventories the current skillsets for BCM and identifies and addresses any training gaps.
    2. Establishes goals and objectives for supporting the BCM program as part of the entity’s performance management process.
    3. Implements a training program to educate stakeholders about the BCM goals and objectives. Elements may include:
      • Exercises.
      • Current risks.
      • Future risks.
      • Recent failures.
      • New programs/technologies.
      • Organizational changes.
      • Previous (exercise) lessons learned.
  2. Assess whether management tailors training to the target audience, based on the audience’s needs. The target audience could include:
    1. Board members.
    2. Senior management.
    3. Business process owners.
    4. Frontline personnel.
    5. Contract personnel, as applicable.
  3. Validate that management incorporates significant business continuity concepts, interdependencies, disruption impacts, and operations resilience into the training program.
  4. Verify that the BCM training program, including board training, is updated as significant changes occur.
Objective 10: Determine whether the exercise and testing program is sufficient to allow management to assess the entity’s ability to meet its continuity objectives. (VII, “Exercises and Tests”)
  1. Determine whether management implemented a comprehensive exercise and testing program, objectives, and plans to validate the entity’s ability to restore critical business functions.
  2. Verify that the program is appropriate for the entity’s risk profile. Assess whether the entity’s consolidated exercise and test schedule is reflective of exercise and test objectives and the overall exercise and test universe.
  3. Determine whether management covers all of the functions in the exercise and test universe according to its established timeframes (e.g., all processes are covered annually or every three years).
  4. Determine whether management has designated personnel with the authority to control the exercise or test and confirm exercise and test milestones are met.
  5. Verify that business line management retains ownership for testing its specific business processes and coordinates with personnel involved in the enterprise-wide BCM process and support areas.
  6. Verify that exercises and tests occur at appropriate intervals, or when significant changes affect the entity’s operating environment.
  7. Verify that management developed a process that is sufficiently robust to confirm the effectiveness of the entity’s business continuity program. Therefore, the exercise program should incorporate the following:
    1. A policy that includes strategies and expectations for exercise and test planning.
    2. Roles and responsibilities for implementation.
    3. Sufficient personnel to perform the exercise or test, provide oversight, and document the results.
    4. Precautions to safeguard production data, such as performing a backup before performing a test in a test environment, or testing during non-peak hours.
    5. Provisions for emergency stops and concluding exercises and tests.
    6. Verification of continuity and resilience process assumptions and the ability to process a sufficient volume of work during adverse operating conditions.
    7. Activities commensurate with the importance of the business process.
    8. Entity’s processes commensurate with their significance to critical financial markets.
    9. Comparison of exercise and test results against the BCP to identify gaps between the exercise or test process and recovery guidelines, with revisions incorporated where appropriate.
    10. Independent review of business continuity program and exercises and tests (internal and external).
  8. Determine whether the exercise and test policy is appropriate and includes the following:
    1. Key roles and responsibilities.
    2. Minimum frequency, scope, and reporting.
    3. Documentation expectations.
    4. Processes for correcting deficiencies identified during exercises or tests.
    5. Communication and connectivity between the entity and third-party service providers.
    6. Participation with critical third-party service providers to confirm that entity personnel understand integration with all related recovery processes.
  9. Determine whether the exercise and test strategies allow management to demonstrate the entity’s ability to support connectivity, functionality, volume, and capacity using alternate facilities. Strategies may include the following:
    1. Expectations for individual business lines and use of exercise and testing methodologies and scenarios.
    2. Internal and external dependencies, including activities outsourced to domestic and foreign-based third-party service providers.
    3. Multi-year plan(s) to execute the specific depth and breadth of exercises and tests, which use different methodologies and scenarios over time.
    4. Expectations for testing internal and external recovery dependencies.
    5. Assumptions, methodologies, and exercises used to develop the test strategies.
    6. Transaction processing and functional testing to assess the recoverability of infrastructure, capacity, and data integrity.
  10. Verify that exercise and test objectives include resilience, system monitoring, and the recovery of business processes and critical system components.
  11. Verify that exercises and associated tests accomplish the following objectives:
    1. Build confidence that resilience and recovery strategies meet business requirements.
    2. Demonstrate that critical services can be recovered within agreed upon recovery objectives (RTOs, RPOs, and MTDs) and customer SLAs.
    3. Establish that critical services can be restored in the event of an incident at the recovery location.
    4. Familiarize staff with recovery processes.
    5. Verify that personnel are adequately trained and knowledgeable of recovery plans and procedures.
    6. Confirm that exercise and test plans remain compatible with the BCP and the entity’s infrastructure.
    7. Identify any gaps between business continuity procedures and objectives.
  12. Determine whether management established exercise and test plans, commensurate with the nature, scale, and complexity of the recovery objectives that address the objectives and expectations of the exercise or test and outline the scenario and any assumptions or constraints that may exist. Verify whether exercise and test plans include the following:
    1. Identification of roles and responsibilities for participants, support personnel, and observers.
    2. Metrics to assess whether objectives are met.
    3. A consolidated exercise and test schedule that encompasses all objectives.
    4. Specific descriptions of objectives and methods.
    5. Roles and responsibilities for all test participants, including support personnel.
    6. Identification of decision makers and succession plans.
    7. Exercise and test locations to be utilized.
    8. Escalation procedures and the ability to adjust for simulated scenarios.
    9. Contact information.
  13. Determine whether management developed reasonably foreseeable threat scenarios that simulate disruptions in business functions and the ability to meet both business requirements and customer expectations. Management should:
    1. Identify and document assumptions used in developing each scenario.
    2. Develop scenarios that include threats that could affect third-party service providers, including communication processes with applicable stakeholders.
    3. Develop exercises that demonstrate not only the ability to failover to an alternate site but also validate recovery objectives.
    4. Create scenarios that include only the data and systems that would be available for recovery.
  14. Verify that exercise and test scripts document the procedures for executing the exercise or test, which may include:
    1. Applications, business processes, systems, or facilities reviewed.
    2. Sequential steps for employees or external parties to perform.
    3. Procedures to guide manual work-around processes.
    4. A detailed schedule for completion.
    5. Methods for participants to record results, quantifiable metrics, and any issues.
  15. Assess whether exercise and test methods are commensurate with the size and complexity of the entity and the criticality of the function to the entity. Verify that exercises and tests are designed to do following:
    1. Validate personnel knowledge and skills, including backup responsibilities.
    2. Operate and perform duties (e.g., daily, quarterly, annually) from an alternate site.
    3. Process transactions and assess system functionality.
    4. Test the viability of both full and incremental backups.
    5. Test network connectivity and interdependencies, including those with critical third-party service providers.
  16. If management performs full-scale exercises, verify whether the exercise includes the following, where appropriate:
    1. Engaging personnel from all business units to participate and interact with internal and external management response teams.
    2. Validating that the crisis/emergency management process is operating as designed.
    3. Verifying personnel knowledge and skills.
    4. Validating management response and decision-making capability.
    5. Demonstrating coordination among participants and decision makers.
    6. Validating communication protocols.
    7. Conducting activities at alternate locations or facilities.
    8. Processing data using backup media or alternative methods.
    9. Completing actual transactional volumes or an illustrative subset.
    10. Performing recovery exercises over a sufficient length of time to allow issues to unfold as they would in a crisis.
  17. If management performs limited-scale exercises, verify whether the exercise includes the following, where appropriate:
    1. Implementing a plan appropriate to the scenario.
    2. Verifying personnel knowledge and skills.
    3. Validating management response and decision-making capability.
    4. Executing on-the-scene coordination and decision-making roles.
    5. Verifying whether participants can connect to alternate system(s).
    6. Conducting activities at alternate locations or facilities.
    7. Testing communication and remote access capability (e.g., switching to alternate equipment or telecommuting).
  18. If management performs tabletop exercises, determine whether targeted plans and procedures are reasonable, personnel understand their responsibilities, and different departmental or business unit plans are compatible with each other. (By themselves, tabletop exercises are likely insufficient to validate recovery capabilities because they are limited to a discussion-based analysis of policies and procedures.) Tabletop exercises may include the following:
    1. Engaging operational and support personnel who are responsible for implementing the BCP.
    2. Practicing and validating specific functional response capabilities.
    3. Demonstrating knowledge and skills, as well as team interaction and decision-making capabilities.
    4. Role playing with simulated responses, evaluating critical steps, recognizing difficulties, and resolving problems.
    5. Clarifying critical plan elements, as well as problems noted during exercises.
    6. Creating action plans to correct issues.
  19. Verify that management clearly defines the characteristics of a successful test, which may include the following:
    1. Validating RPOs, RTOs, and MTDs.
    2. Demonstrating recoverability at peak volumes.
    3. Confirming that systems can support critical business processes (e.g., transfer to alternate sites, increased workloads, manual workarounds, and communication).
    4. Integrating technologies that support critical business activities, including data replication, recovery, and off-site storage.
    5. Testing backup data to assess integrity and availability.
    6. Certifying facility controls (e.g., environmental, backup power, and physical security).
    7. Verifying workspace restoration (e.g., network connectivity and communications).
    8. Ensuring that personnel are familiar with and are able to execute their responsibilities.
  20. Determine whether the right to perform testing or participate in exercises and tests with third parties is described in the contract governing the entity’s relationship with the third-party service provider.
  21. Determine whether exercises and tests with third-party service providers are included in the entity’s enterprise exercise and test program based on the risk prioritization of the third-party service provider and the criticality of the services provided to the entity. Assess the following:
    1. The process to rank third-party service providers based on criticality, risk, and testing scope.
    2. Coordinated exercises and tests that reasonably validate the abilities of both the entity and the third-party service provider to recover, restore, resume, and maintain operations after disruptions consistent with business and contractual requirements.
    3. Evidence that exercises and tests of critical service providers include reasonably foreseeable significant disruptive events.
    4. Documentation of the scope, execution, and results of exercises and tests in which the entity is unable to directly participate.
  22. Determine whether the entity participates in its critical third-party service providers’ exercise and test program(s) at reasonable intervals. Assess the execution of the exercises and tests and whether they included the following:
    1. End-to-end and, when appropriate, full-scale exercises.
    2. Transaction processing and functional testing.
    3. Network connectivity and interdependencies to include those with critical fourth parties.
    4. Bidirectional operations between the entity’s and its third-party service provider’s primary and alternate locations and systems.
    5. Supply chain considerations.
  23. Determine whether testing scenarios with critical third-party service providers consider the following:
    1. An outage or disruption of the service provider.
    2. An outage or disruption at the entity.
    3. Incident response plans.
    4. Crisis management plans.
    5. Communication processes with third-party service providers and other stakeholders.
    6. Cyber events.
    7. Returning to normal operations.
  24. Determine whether the tests validate the core or significant firm’s backup arrangements to confirm the following:
    1. Backup sites are able to support typical payment and settlement volumes for an extended period.
    2. Backup sites are fully independent of the critical infrastructure components that support the primary sites.
    3. Trained employees are located at the backup sites at the time of disruption.
    4. Backup site employees are independent of the staff located at the primary site at the time of disruption.
    5. Backup site employees are able to recover clearing and settlement of open transactions within the time frames addressed in the BCM processes and applicable industry standards.
  25. Determine whether the exercise and test assumptions are appropriate for core and significant firms and consider the following:
    1. Primary data centers and operations facilities that are completely inoperable without notice.
    2. Whether personnel at primary sites, who are located at both data centers and operations facilities, are unavailable for an extended period.
    3. Whether other organizations are also affected, causing effects that have the potential to cascade from one organization across to the entire financial services sector.
    4. Infrastructure (e.g., power, telecommunications, transportation) that is disrupted.
    5. Whether data recovery or reconstruction to restart payment and settlement functions can be completed within the time frames defined by the BCM process and applicable industry standards.
    6. Whether continuity arrangements continue to operate until all pending transactions are closed.
  26. Determine whether the core firm’s testing strategy includes plans to test the ability of significant firms that clear or settle transactions to recover critical clearing and settlement activities from geographically dispersed backup sites within a reasonable time frame.
  27. Determine whether the significant firm has an external exercise and test strategy that addresses key interdependencies, such as exercises and tests with third-party market providers and key customers, and determine the following:
    1. Whether external exercise and test strategies include the significant firm’s backup sites to the core firm’s backup sites.
    2. Whether the significant firm participates in industry (e.g., U.S. Department of the Treasury’s Hamilton Series and FS-ISAC’s CAPS exercises) or cross-market tests sponsored by core firms, markets, or trade associations. Tests should incorporate verifying the connectivity from alternate sites and include transaction, settlement, and payment processes, to the extent practical.
  28. Determine whether the exercise and test program is sufficient to demonstrate the entity’s ability to meet its continuity objectives and whether the results demonstrate the readiness of personnel to achieve the entity’s recovery and resumption objectives. Determine whether management accomplishes the following:
    1. Coordinate the execution of its exercise and test program to fully exercise its business continuity planning process.
    2. Analyze and compare results against stated objectives.
    3. Raise issues with appropriate personnel and assign responsibility for resolution.
    4. Escalate issues that cannot be resolved in a timely manner to the appropriate level of management.
    5. Prioritize and track issues through final resolution.
    6. Analyze results and issues to determine whether problems can be traced to a common source.
    7. Document recommendations for future exercise and tests.
  29. Verify that corrective actions have been implemented and that retesting occurs in a timely fashion to address deficiencies in meeting the entity’s objectives.
  30. Verify that test results are used to update the business continuity processes, enhance future testing, and evaluate whether risk mitigation strategies should be adjusted.
Objective 11: Determine whether management continuously measures the progress and assesses the effectiveness of BCM and uses the information to improve the BCM process. (VIII, “Maintenance and Improvement”)
  1. Determine whether management reviews and updates the business continuity program to reflect the current environment. Triggers that prompt maintenance and improvement of the BCM may include the following:
    1. Changes in enterprise strategies.
    2. New or reconfigured products, services, or infrastructure.
    3. Changes in products and services offered by third-party service providers.
    4. Deficiencies identified in third-party service provider BCM processes.
    5. New legislation, regulatory requirements, or resilience practices.
    6. Results of operational metric analysis (e.g., key risk indications, key performance indicators).
    7. Early warning indicators that may identify potential continuity events, crises, or incidents (e.g., frequency and severity of storms, heightened cyber attack activity, or increases in customer service calls).
    8. Variances between budgeted and actual BCM expenses.
    9. Results from exercises and tests and lessons learned.
    10. Changes in the threat landscape (e.g., new capabilities, intent of threat actors).
    11. Recommendations (e.g., from audits, vulnerability assessments, and penetration tests, including those involving the use of advanced cybersecurity analysis and assessments).
  2. Determine whether management has documented, analyzed, and reviewed lessons learned from adverse events. Documented procedures for incorporating lessons learned may include:
    1. Identifying the failure(s).
    2. Determining the cause(s).
    3. Evaluating potential solutions.
    4. Implementing corrective actions as appropriate.
    5. Recording and reviewing corrective actions taken.
  3. Verify that management documents, tracks, and resolves any changes when updating the BCP and the exercise and testing program(s). Furthermore, verify that management maintains appropriate version control of key BCM documents.
  4. Determine whether management maintains backup copies of relevant BCM documentation in the event that the primary repository becomes inaccessible.
Objective 12: Determine whether the board has established expectations for BCM reporting. (IX, “Board Reporting”)
  1. Review board minutes to determine whether management periodically reports to the board on the status of BCM.
    1. Determine whether reports include a written BCM presentation, including the BIA, risk assessment, BCP, exercise and test results, and identified issues.
    2. Determine whether management provides the board with regular strategy updates based on changes in personnel, roles and responsibilities, and business operations.
    3. Verify that management documents the reasons (e.g., cost and service level) for choosing recovery alternatives and why they are appropriate based on the entity’s risk profile and complexity.
    4. Assess whether the board provides a credible challenge to management, when appropriate.
Objective 13: Discuss corrective action and communicate findings.
  1. Review preliminary conclusions with the examiner-in-charge regarding the following:
    1. Apparent violations of laws and regulations.
    2. Significant issues warranting inclusion in the report of examination.
    3. Proposed Uniform Rating System for IT (URSIT) management component rating and the potential impact of the examiner’s conclusions on composite or other URSIT component ratings.
    4. Potential impact of the examiner’s conclusions on the entity’s risk assessment(s).
  2. Discuss findings with management and obtain proposed corrective action for significant deficiencies.
  3. Document conclusions in a memorandum to the examiner-in-charge that provides report-ready comments for all relevant sections of the report of examination and clarifying guidance to future examiners.
  4. Organize work papers to show clear support for significant findings by examination objective.

 

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Appendix B: Glossary