Marking Your Own Homework

In these days of rampant grade inflation in exams (denied by politicians and blindingly obvious to everybody else), one is tempted to try to identify the cause. Why are your children’s A Levels so much better than yours? After a pause of anything up to half a millisecond, the most recent cause is clear. Teachers, with the best of intentions, are putting in their recommendations for the grades the pupils they have taught should receive. With the exception of the argument that teachers know their pupils better than anyone else, there are more flaws in this methodology than there are stars in the sky. One of the obvious flaws is that they are too close to everything to provide a truly objective opinion. The pupils who have received these grades are going to be dogged with the “ah – but you got these grades during the pandemic…” response for years to come. Worse still some will believe they are better than they are and undertake a degree course for which they are not suited, thus costing them and the country a small fortune.

It is reasonable at this juncture to do a quick double take and check you are reading something about Operational Resilience and not The Times Educational Supplement.

Sadly, you are on the right page.

The PRA and the FCA have, as you will probably be aware, produced Policy Statements on Operational Resilience with the initial deadline of 31st March 2022 for phase one to be complete. This will involve, among other things, testing that the Impact Tolerances for the Important Business Services are set correctly. Testing on a wider basis to prove that the business will continue to function and clients will be serviced during and after the next Black Swan event has long been recognised as sensible (albeit not done frequently enough) and still is.

The entire project to comply with the Policy Statements, for the many firms who fall directly within scope and the many others who are correctly viewing all of this as best practice, is a big one. Firms, for all the usual reasons have sought external help and expertise to ensure they are complying.

So far so good.

This external help is able to look at all aspects of the project. The challenge, as it always has been and always will be, is for the consultants to really get to know the firm they are helping to ensure that not only are the rules being followed but that they are done in such a way as to allow the firm to continue with its day-to-day operations. This means that they have to really understand the business and get close to how it works.

Again, so far so good.

The testing that is now mandated by the regulators has to consider “severe but plausible” scenarios. This should mean the testing is “challenging” and this is where the model starts to look more like Lower Gridlington VI Form College A Level results. The firm has just spent a considerable amount of money paying for consultants to produce a solution. However good those consultants are, the underlying question has to be whether the testing was designed to be passed? The consultants are marking their own homework. Up to a point (let’s call them “Mocks”), it is perfectly sensible for the consultants to do this work. The “Finals”, to mix my educational metaphors, should be tested independently. Only in that way does the testing have true credibility in the eyes of all the stakeholders – the shareholders, the clients and the regulators.

Aldbury International is quite able to take you up to the “Mocks” or see you through your “Finals”.