[OR] [MBT] [E3] [CBS] [8] [SuPS] Identify Severe but Plausible Scenarios

Sub-CBS Code

Sub-CBS

Severe but Plausible Scenario

Impact/Effect

Proactive Risk Management Action

8.1

Client Onboarding and Profiling

Data breach or cyberattack exposing sensitive client information during the onboarding process.

Loss of client trust, reputational damage, regulatory scrutiny, and potential legal consequences.

Multi-factor authentication, encrypted data storage, continuous monitoring, and incident response plans.

8.2

Investment Advisory and Portfolio Management

Flash crash or market disruption leading to significant financial losses for clients and reputational damage.

Client dissatisfaction, financial loss, damage to brand reputation, and regulatory review.

Stress testing, scenario planning, emergency response strategies, and continuous monitoring of market conditions.

8.3

Trust Account Establishment and Administration

System failure is causing delays or errors in the setup of trust accounts, leading to non-compliance or regulatory penalties.

Delay in client trust setup, non-compliance risks, regulatory fines, and loss of client confidence.

System reliability upgrades, automated validation checks, frequent backup and recovery drills, and disaster recovery planning.

8.4

Fund and Asset Management Operations

Regulatory audit failure or non-compliance due to incorrect asset reporting, risking penalties.

Potential penalties, loss of investor confidence, and legal and financial repercussions.

Regular compliance audits, automation of reporting processes, and real-time regulatory compliance updates.

8.5

Wealth and Estate Planning Services

Legal challenge due to mishandling of estate planning or beneficiary conflicts, leading to client dissatisfaction and legal action.

Legal expenses, client loss, reputational damage, and potential for long-term litigation.

Improved client communication, robust legal reviews, regular training, and automated updates to estate planning documents.

8.6

Regulatory and Fiduciary Compliance Management

Failure to meet regulatory deadlines or misinterpretation of evolving fiduciary duties risks regulatory fines or sanctions.

Non-compliance penalties, operational inefficiencies, loss of trust, and reputational damage.

Ongoing regulatory monitoring, automated compliance tracking systems, and staff training on fiduciary responsibilities.

8.7

Client Reporting and Relationship Management

Breakdown in communication systems leading to a delay in reporting, resulting in client dissatisfaction and potential loss of business.

Client churn, reputational damage, and loss of trust.

Upgraded communication infrastructure, regular client satisfaction surveys, and emergency communication protocols.

8.8

Custodial and Safekeeping Services

Physical breach or cyberattack leading to theft or loss of client assets held in custody.

Loss of client assets, significant financial damage, and regulatory intervention.

Regular security audits, physical access control, cybersecurity measures for custodial systems, and real-time monitoring.