[OR] [BDCB] [E2] [C12] Performing Scenario Testing

Chapter 12

 Performing Scenario Testing

Introduction

In the dynamic financial environment where central banks operate, scenario testing has emerged as a critical tool to ensure operational resilience. For the Brunei Darussalam Central Bank (BDCB), which serves as the guardian of monetary stability, payment integrity, and financial sector oversight, scenario testing provides a structured approach to assess the organisation’s readiness against disruptions.

This stage of the Implement phase of the Operational Resilience Planning Methodology allows BDCB to validate whether its response and recovery strategies are effective when confronted with severe but plausible shocks.

By simulating events such as a real-time gross settlement (RTGS) failure, cyberattacks on the Integrated Financial Intelligence System (IFIS), or liquidity pressures on domestic banks, BDCB can uncover vulnerabilities that may not surface during routine operations. Scenario testing not only evaluates technical systems but also measures decision-making processes, communication channels, and stakeholder coordination under stress.

The insights gained from these exercises guide enhancements to contingency measures, strengthen inter-agency collaboration, and ultimately preserve public confidence in Brunei’s financial system.

Chapter: Performing Scenario Testing

1. Objectives & Scope

At this stage, BDCB activates its resilience framework by stress-testing critical operations and systems. The goal is to validate preparedness, identify gaps, and fine-tune recovery strategies across key functions such as retail payments, liquidity support, FinTech sandbox operations, and AML/CFT systems.

Example: Given BDCB's centrality to Brunei’s RTGS, ACH, and collateral registry—as well as the Integrated Financial Intelligence System (IFIS)—scenario testing should incorporate simulations like:

• RTGS failure during peak interbank settlement.
• Disruption within the IFIS amid heightened AML/CFT activity.

2. Developing Plausible Adverse Scenarios

Develop a range of relevant scenarios, tailored to the Bank’s infrastructure and system interdependencies:

• High-Impact Operational Disruption: Simulate a cyberattack leading to temporary unavailability of IFIS, undermining STR/CTR processing.
• Payment System Overload: Mimic massive spikes in digital transactions (e.g. during economic stimulus disbursement), testing RTGS/ACH batching resilience.
• FinTech Sandbox Contagion: Introduce a failure cascade from a sandbox participant (e.g., MoneyMatch) to test containment protocols Reddit.
• Liquidity Strain Scenario: Model a liquidity crunch where banks heavily tap into Overnight Standing Facilities using BDCB I-Bills and Sukuk instruments.
• Pandemic-like Shock: Replay disruptions akin to COVID-19, including physical currency processing constraints (e.g., quarantining banknotes) and surging digital demand bdcb.gov.bn.

3. Designing Scenario Tests & Methodology

Step-by-step process:

1. Define clear scenario parameters: E.g., IFIS is down for 48 hours during heightened STR submissions.
2. Scope selection: Cross-systems (RTGS, liquidity tools, IFIS) or siloed tests as needed.
3. Stakeholder roles: Activate Command Centre, IT teams, Monetary Operations, AML/FIU units.
4. Testing approach:
   • Tabletop exercises to walk through the steps and responsibilities.
   • Sophisticated simulations (e.g., load-testing RTGS infrastructure).
5. Contingency activation: Ensure fallback procedures—alternate data paths, manual processing protocols—are triggered.
6. Assessment metrics: Measure effectiveness in downtime, transaction backlogs, and fund flow recovery times.

4. Practical Example: IFIS Downtime During High AML Volume

• Scenario: A cyber incident knocks IFIS offline for 24 hours amid an influx of Suspicious Transaction Reports.
• Exercise Method:
  1. Simulate the outage during a drill.
  2. Execute fallback: shift manual report intake and data logging.
  3. Reroute processing to a backup or alternate communication mechanism.
  4. Post-outage, reconcile data and evaluate backlog.
• Evaluation:
  • Downtime duration vs. target instrument.
  • Time to process backlog.
  • Accuracy of manual submissions.
  • Stakeholder coordination performance (FIU, IT, reporting entities).

5. Practical Example: RTGS Load Spike with Payment Surge

• Scenario: A sudden doubling of inbound interbank transfers (e.g., government payroll) causes system strain.
• Exercise Method:
  1. Ramp up simulated volume in a controlled test environment.
  2. Monitor processing latency, system capacity.
  3. Assess alternate channels or rate-limiting policies.
• Evaluation:
  • Throughput achieved vs expected.
  • Latency peaks and resolution.
  • Effectiveness of throttling or prioritisation rules.

6. Post-Exercise Review & Reporting

After completing the tests, conduct a structured review:

• Debrief with participants: Capture lessons learned, identify bottlenecks.
• Gap analysis: Document issues—technical, procedural, and staff capability.
• Recommendations:
  • Enhance redundancies (e.g., backup data centres for IFIS & RTGS).
  • Update policy manuals and training guidelines.
  • Expand testing scenarios to include cross-border FinTech spillover risks.
• Reporting:
  • Share findings with senior management and the Board.
  • Set timelines for remediation.
  • Plan periodic re-testing cycles (e.g., semi-annual).

7. Integration into Continuous Resilience Cycle

Scenario testing isn’t a one-off—embed it as part of BDCB’s continuous operational resilience enhancement:

• Schedule regular scenario exercises, incorporating new threat vectors (cyber, climate events, FinTech scale-up).
• Track resolution of identified deficiencies through governance dashboards.
• Align with broader regulatory expectations and frameworks—e.g., alignment with ASEAN or international central bank resilience benchmarks.
  BDCB already conducts thorough onsite/offsite inspections and assesses technology risks across institutions bdcb.gov.bn.

Summary Table

Closing Thought

Performing scenario testing ensures that BDCB’s critical infrastructure—such as digital payments (RTGS, ACH), the IFIS, and liquidity tools—can withstand shocks and remain operational. By rigorously testing, learning, and iterating, BDCB reinforces its role in preserving financial stability and resilience in Brunei’s economy.

Summing Up ...

Scenario testing is more than a compliance requirement—it is a proactive resilience practice that enables BDCB to prepare for the unexpected. Through carefully designed exercises, the Bank gains assurance that its critical services can withstand disruptions and continue to support the financial sector and wider economy. Lessons learned from each test become invaluable inputs for refining operational strategies, enhancing redundancy, and developing a culture of preparedness across the organisation.

As threats to financial stability continue to evolve—whether from cyber risks, technological disruptions, or systemic shocks—BDCB’s commitment to ongoing scenario testing ensures that resilience remains a living capability rather than a static plan. By embedding these exercises into its resilience cycle, BDCB not only safeguards the continuity of critical functions but also reinforces its role as a trusted steward of Brunei Darussalam’s financial system.

	Operational Resilience at BDCB: A Strategic Implementation Guide
	"Implement" Phase of the Operational Resilience Planning Methodology
	C8	C9	C10	C11	C12	C13

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