Basis for Calculating Hard and Soft Impact

This is a series of questions asked when completing the BIAQ in the area of soft and hard impact.

• Is it based on worst-case scenario?
  • It should be based on a normal working day or time period. The difficulty experienced when completing this form is to decide whether to based on the worst-case scenario or based on an ordinary day.
• Do we take the average over last month/year?
  • For exact function, it may be easier to take 365 days of the transaction value (divide by) 12 month (Divide by) 4 weeks
• Do we calculate for 1 day or must it be for 7 days?
  • The calculation should be based on a 7-day basis (Key Disaster Scenario), but however, certain functions will cease to operate, say after 2 to 3 day. Hence, there will be no computation after the 3rd day after the disaster had occurred.
• How to account for or avoid double counting?
  • Normally, this is done by cross-referencing between the front and the back-office functions.
• Do we define one for each applicable hard impact such as one for revenue, one for management fees, one for trading fees, one for clearing fees, OR lump them together?
  • The amount is separate and combined as one figure when presenting in the spreadsheet. The detailed computation is usually kept in the lower portion of the BIAQ spreadsheet.
• Do we define one for each applicable soft impact such as one for reputation, one for goodwill, one for customer confidence, one for loss of efficiency, loss of employee’s morale, OR lump them together?
  • For soft impact, we tend to focus on those that are of most concern e.g. Loss of license, as compare to just merely Loss of reputation.

Notes

The guiding principle for estimating the financial impact is to provide management with a "ball-park" figure of $100,000 or $1,000,000 or 10,000,000 loss.

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