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Answer: Increase the bandwidth capacity for the firm's equity trading platform and procure remote backup capabilities so the platform can continue to function during an outage.
**D is correct.** Operational resilience relates to the ability of firms and the financial sector as a whole to prevent, adapt, respond to, recover from, and learn from operational disruptions. Importantly, regulators view operational resilience from the perspective of "important business services" which would cause intolerable levels of harm to consumers or market integrity if they are disrupted. The firm's trading platform is an example of an important business service and as such these actions should improve its resilience and help to comply with regulatory expectations. **A is incorrect.** Increasing internal performance incentives does not necessarily increase the ability of the firm's ability to deliver its processes reliably. **B is incorrect.** While consolidating costs from multiple systems might be efficient, human resources and payroll are not customer-facing systems and improvements to them would not benefit customers or market integrity. **C is incorrect.** Reserving additional economic capital for operational risk, while potentially beneficial for risk management purposes, does not directly improve the ability of any of the firm's important business services to become more resilient to potential disruptions.
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A UK-based retail brokerage firm has recently experienced rapid growth through a series of acquisitions and plans to improve its operational resilience in order to comply with new requirements issued by national regulators. The CRO asks an operational risk manager to assess best practices in this area and to suggest potential actions that the firm should take to meet this objective. Which of the following actions would be most appropriate for the manager to recommend in order to comply with the regulatory guidelines concerning operational resilience for important business services?
A
Increase the existing performance incentives for the firm's brokers and sales representatives to further enhance their productivity.
B
Reduce costs by consolidating the human resources and payroll functions of the acquired firms into a single firm-wide process.
C
Reserve additional economic capital for operational risk to provide an incremental capital cushion against potentially extreme operational losses.
D
Increase the bandwidth capacity for the firm's equity trading platform and procure remote backup capabilities so the platform can continue to function during an outage.