(SINGAPORE) The Singapore Exchange's (SGX) recent proposal to have its member firms maintain a business continuity plan (BCP) has met with mixed reactions.

While most agree such a scheme would help brokerages cope in the event of disasters, some are concerned it overlaps an earlier scheme put in place by the Monetary Authority of Singapore (MAS).

The SGX had earlier last month sought public feedback on proposed business continuity management (BCM) requirements for its securities and derivatives members. These include the likes of Merrill Lynch Singapore, CIMB-GK Securities, OCBC Securities, DBS Vickers, Westcomb Securities, Barclays Bank plc and Goldman Sachs Futures.

The exchange has suggested that members document their business continuity arrangements in a BCP document, appoint a senior officer to be responsible for their BCPs and regularly review and test their BCPs.

The SGX said in a consultation paper that it had taken a leaf from the BCM guidelines issued by the MAS for financial institutions in 2003.

The MAS had issued the risk management guidelines to encourage financial institutions to adopt sound BCM practices to strengthen their resilience against potential disruptions to their operations.

Some brokerages are now concerned that the recent proposals by the SGX overlap the MAS guidelines, which could lead to an unnecessary increase in their compliance obligations - since brokerages are also considered financial institutions under the purview of the MAS.

'The scheme proposed by the SGX is exactly the same as that put in place by the MAS - which leads one to question why the regulators don't just coordinate their efforts, instead of duplicating the BCM requirements for brokerages,' says CIMB-GK Research CEO, Song Seng Wun, who is overseeing the BCM plan at his unit.

'There's also the issue of who we should contact in the case of a real emergency - would it be the SGX or the MAS? There should just be one central coordinating unit, so that we don't have to waste time or effort responding to different regulatory bodies,' Mr Song adds.

Global risk consultancy and insurance broker, Marsh Inc, also believes the regulatory bodies should clarify whom brokerages report to, in the event of an emergency. 'I would assume that public-listed companies should notify the SGX, while the others contact the MAS; but it would be best if the SGX and the MAS clarify who's in charge, in which instance,' says Siti Baizura Yunus, Marsh's BCP/BCM practice leader for Asia.

However, that issue aside, Ms Baizura doesn't see SGX's proposed BCM scheme as overlapping efforts by the MAS. Instead, she believes the proposals by the SGX complement the guidelines put in place by the MAS - and help to send a clear signal that business continuity planning is an important component of any company's risk management.

'Even if it wasn't for the MAS guidelines, many brokerages may already have to maintain some sort of BCP because they're required to do so by their regulatory bodies back home. So what the new proposals by the SGX will do is to further drive home the message that BCP is a crucial element for companies,' Ms Baizura says.

KPMG's head of IT Advisory Services, Ho Wah Lee, also sees the BCP requirements suggested by the SGX as being complementary to the guidelines introduced by the MAS.

'Together, they lay the foundation for more organisations to become resilient while helping to build a 'collective resilience' for the financial services sector as a whole. This is also a step forward in helping set consistent standards and expectations, while encouraging and promulgating best practices,' Mr Ho said.

'Consistent standards can facilitate industry-wide business continuity exercises and benchmarking activities as it facilitates coordination between participants and may actually increase participation,' he added.

Ms Baizura also noted that Asia is still relatively new to the BCM scene, with many companies still not recognising the need to integrate business continuity planning into their operations - and that the SGX's move would help to encourage this practice.

'The SGX's suggestions are also in line with best practices in other developed markets, such as the US, UK and Australia and will help to bring the local marketplace up to these standards. It's good that they have chosen to take a leaf from best practices in these markets, instead of reinventing the wheel,' she adds.

She points out that maintaining a BCP will add a cost to business - with the exact amount varying depending on the sort of plan each company adopts. However, she's quick to add that this 'cost' will result in many benefits to businesses, as it helps companies to better manage and focus their resources.

'A study Marsh conducted with Oxford University in 1996 also showed that companies with BCPs enjoyed a better share price performance - as investors believed these companies were better at managing their risks and better able to respond to crises,' she said.

Mr Ho believes companies will benefit much from continuity planning: 'This planning signals to the markets an organisation's confidence in their ability to remain a going concern in a 'crunch time'. Without continuity planning, organisations may place their reputation, employee welfare and ultimately shareholder value at risk.'

However, the success of BCM will depend very much on how well they're implemented. BCPs must be well-supported by management in order for them to succeed.

Ms Baizura shares her personal experience: 'I used to be in charge of BCM at companies, before I started work at Marsh and I can tell you that the tone from the top is very important. It is very difficult for a BCP to be carried out effectively if there isn't support from upper management. Companies must embed BCM in their day-to-day operations, make it a part of their culture, educate and constantly train staff, in order to succeed.'

This article was first published in The Business Times on Jun 2, 2008

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