[OR] [KIB] [E3] [CBS] [2] [ITo] Establish Impact Tolerances

Written by Moh Heng Goh | Feb 20, 2026 7:00:02 AM

CBS-2 Clearing & Settlement Services

Introduction

In the landscape of modern banking, the ability to withstand operational disruptions is crucial for maintaining financial stability, client trust, and regulatory compliance. CBS 2 – Clearing & Settlement Services is a core function of Kenanga Investment Bank, responsible for ensuring the accurate and timely processing of trades, margin requirements, settlements, reconciliations, corporate actions, and reporting obligations.

Given its criticality, even a temporary disruption can have significant financial, regulatory, and reputational consequences.

This chapter focuses on establishing impact tolerance for CBS 2, defining the acceptable level of disruption in terms of time, data loss, and downstream effects. By setting these thresholds, the bank can proactively design operational resilience measures, allocate resources effectively, and ensure continuity under adverse scenarios.

Purpose of the Chapter

The purpose of this chapter is to guide readers through the rationale and methodology for determining Maximum Tolerable Downtime (MTD) and Maximum Tolerable Data Loss (MTDL) for each detailed process of CBS 2. Establishing impact tolerances:

Helps quantify the risk exposure for each sub-process.
Ensures regulatory expectations under operational resilience frameworks are met.
Provides clarity on potential customers and market impacts if a disruption occurs.
Serves as a benchmark for ongoing resilience improvements, testing, and monitoring.

Table P4: Establish Impact Tolerance for CBS-2

Sub-CBS Code	Sub-CBS	MTD	MTDL	Customer Impact	Regulatory Impact	Impact Type	Current Resilience Status	Action Required
2.1	Trade Capture & Validation	2 hours	15 mins	High: Delayed trade processing	High: Regulatory reporting delays	Financial & Operational	Moderate: Automated validation in place	Enhance monitoring; implement backup trade capture
2.2	Clearing Instructions & Netting	4 hours	30 mins	High: Disruption in netting & settlements	High: Potential regulatory breaches	Financial	Moderate: Netting system resilient	Introduce parallel netting checks
2.3	Margin & Collateral Management	2 hours	15 mins	High: Margin calls delayed	High: Non-compliance with BNM requirements	Financial	Moderate	Review collateral workflow; add redundancy
2.4	Settlement Execution	1 hour	5 mins	Very High: Missed settlements impact liquidity	Very High: BNM settlement reporting	Financial	High: Automated settlement engine	Conduct regular settlement drills
2.5	Funds & Securities Reconciliation	6 hours	1 hour	Medium: Late reconciliations	Medium: Reporting inconsistencies	Operational	Moderate	Strengthen reconciliation automation
2.6	Corporate Actions Processing	12 hours	2 hours	Medium: Delays in corporate actions	Medium: Regulatory notifications affected	Operational	Low	Implement corporate actions monitoring system
2.7	Exception & Fail Management	1 hour	5 mins	High: Unresolved trade exceptions	High: Regulatory breach if fails not reported	Operational & Compliance	Moderate	Enhance exception handling protocols
2.8	Regulatory & Financial Reporting	24 hours	1 hour	High: Late reports	High: Non-compliance with BNM	Compliance	Moderate	Automate reporting; schedule alerts for deadlines
2.9	Client & Counterparty Communication	2 hours	N/A	High: Delays in notifications	Medium: Client complaints	Reputational	Moderate	Implement communication redundancy and escalation
2.10	Technology, Controls & Monitoring	30 mins	N/A	High: Disruption in monitoring	High: Could amplify operational risk	Operational	Moderate	Upgrade monitoring tools; introduce failover controls

Note: MTD and MTDL thresholds are indicative and aligned with operational resilience principles outlined in the 2025 BNM Discussion Paper.

Setting impact tolerances for CBS 2 Clearing & Settlement Services provides a clear framework for operational resilience, defining how long and to what extent the bank can tolerate disruptions without causing severe financial, regulatory, or reputational damage.

By identifying the MTD, MTDL, and potential impact for each sub-process, Kenanga Investment Bank can prioritise investments in redundancy, automation, and monitoring, ensuring robust continuity plans are in place.

Continuous review and testing of these tolerances will further strengthen the bank’s readiness to respond to adverse events, aligning operational resilience strategies with regulatory expectations and client trust.

Resilience by Design: Kenanga Investment Bank’s Operational Resilience Journey
eBook 3: Starting Your OR Implementation
CBS-2 Clearing & Settlement Services
CBS-2 DP	CBS-2 MD	CBS-2 MPR	CBS-2 ITo	CBS-2 SuPS	CBS-2 ST

Gain Competency: For organisations looking to accelerate their journey, BCM Institute’s training and certification programs, including the OR-5000 Operational Resilience Expert Implementer course, provide in-depth insights and practical toolkits for effectively embedding this model.

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