Business continuity planning and disaster recovery drills are essential for portfolio managers. This article explains what auditors check and the compliance requirements.
The Regulatory Framework
BCP and DR Requirements
Portfolio managers must establish and maintain contingency plans, including a plan for disaster recovery and periodic testing of backup facilities.
Recovery Objectives
Portfolio managers should have:
- Recovery Time Objective (RTO) of not more than 4 hours
- Recovery Point Objective (RPO) of not more than 30 minutes
Cyber Attack Analysis
The cyber attack incident should be thoroughly analyzed and lessons learned should be used to strengthen the security mechanism and improve recovery planning and process.
Business Continuity Planning
Policy Requirements
Portfolio managers must formulate a comprehensive cyber security and cyber resilience policy document encompassing the BCP and DR framework. The policy document should be approved by the Board or equivalent body.
Key Components
Risk Assessment:
- Identify potential threats to business continuity
- Assess likelihood and impact
Business Impact Analysis:
- Analyze potential business impact of disruptions
- Quantify financial and operational impact
Recovery Strategies:
- Recovery Time Objectives
- Recovery Point Objectives
- Alternative arrangements
Communication Plans:
- Internal communication protocols
- Client communication plans
- Regulatory communication protocols
DR Drills
Testing Requirements
Periodic tests of the critical security procedures and systems and review of the backup facilities shall be undertaken to confirm adequacy.
Frequency
Regular testing of BCP and DR plans is required.
Documentation
All testing activities must be documented.
Remediation
Issues identified during testing must be addressed promptly.
What Auditors Check
BCP Documentation
- Is there a documented BCP?
- Is it approved by the Board?
- Is it reviewed regularly?
DR Plan
- Is there a documented DR plan?
- Are RTO and RPO defined?
- Are backup facilities adequate?
Testing
- Have DR drills been conducted?
- Are testing results documented?
- Have issues been addressed?
Recovery Capability
- Can operations be restored within RTO?
- Can data be recovered within RPO?
Communication
- Are communication protocols in place?
- Have they been tested?
Third-Party Coordination
- Are third-party BCP plans compatible?
- Has coordination been tested?
Best Practices
Regular Testing
Conduct regular BCP and DR drills, including:
- Tabletop exercises
- Technical recovery tests
- Full-scale drills
Documentation
Maintain comprehensive documentation of:
- BCP and DR plans
- Testing results
- Lessons learned
- Improvements made
Review and Update
Review and update BCP and DR plans regularly based on:
- Testing results
- Changing business requirements
- Emerging threats
Consequences of Non-Compliance
Regulatory Action
Failure to maintain adequate BCP and DR capabilities can result in enforcement action by SEBI.
Operational Impact
Inadequate BCP and DR can result in significant operational disruption.
Expert Legal Guidance
Anuj Desai & Associates provides expert legal advisory services on BCP and DR compliance for portfolio managers. Our securities law experts help clients develop compliant plans, conduct drills, and ensure regulatory compliance. Contact us for guidance on BCP and DR and other regulatory matters.