Business Continuity Planning: Preparing for Pandemics and Other Significant Business Disruptions

Broker-dealers and investment advisers operate in environments that are full of risks. Every day, these firms consider a host of risks when making investment decisions, such as market risk, credit risk, and counter-party risk. Along with managing investment risks, firms frequently pay close attention to reputational and regulatory risks that may affect their business.

Appropriately accounting for these types of risks can be what distinguishes well-performing firms from the competition, so it should be no surprise that firms often devote substantial resources to hiring personnel, developing systems, and creating a culture to manage these types of risks.

But as the current COVID-19 pandemic shows, less typical risks also can significantly affect firms. Firms should, consistent with relevant regulatory obligations, have plans in place to deal with events that may significantly disrupt their normal operations.

This article provides an overview of the regulatory obligations for broker-dealers and investment advisers to have business continuity plans that are reasonably designed so that the firms can continue to operate in periods of disruption and addresses topics firms should consider when developing those plans