Operational: Shared Services
OPS SS 1. Contingency Strategies and Arrangements for Critical Shared Services
Q. What did the Agencies mean by "develop documented strategies and contingency arrangements for the continuity or replacement of the shared and outsourced services that are necessary to maintain critical operations"?
A. By strategies and contingency arrangements, the Agencies are referring to the arrangements the firm has in place in order to ensure operational continuity. Components of a strategy and contingency arrangement may include, but are not limited to, maintaining service level agreements (SLAs), strengthening contractual agreements, re-alignment of critical shared services within the corporate structure, and plans to substitute critical shared services during resolution.
OPS SS 2. Working Capital
Q1. Must working capital be maintained for third-party and internal shared service costs?
A1. Where a firm maintains shared service companies to provide services to affiliates, working capital should be maintained in those entities sufficient to permit those entities to continue to provide services for six months or through the period of stabilization as required in the firm's U.S. resolution strategy.
Costs related to third-party vendors and inter-affiliate services should be captured through the working capital element of the MOL estimate (RLEN).
Q2. When does the six month working capital requirement period begin?
A2. The measurement of the six month working capital expectation begins upon the bankruptcy filing of the U.S. IHC. The expectation for maintaining the working capital is effective upon the July 2018 submission.
OPS SS 3. Critical Services Mapping/Legal Entity Rationalization Criteria
Q. How should we think about incorporating our critical services mapping into our legal entity rationalization criteria?
A. The critical services identification and mapping exercise should help the firm identify potential risk(s) to operational continuity in resolution. The firm's legal entity rationalization criteria should then address identified risk(s) to resolvability. See page 23 of the 2018 Guidance.
OPS SS 4. Third-Party Vendor Contract Terms
Q. Can we wait until our critical third-party vendor contracts are up for renewal to add resolution-friendly terms? What if we are unable to revise these contracts by July 2018 because negotiations are still in process or the vendors will not agree to the terms?
A. The Guidance states, "The firm should…update contracts to incorporate appropriate terms and conditions to prevent automatic termination and facilitate continued provision of such services during resolution," which is expected to be addressed by July 1, 2018. Footnote two of the Guidance states, "in the event impediments arise that are outside of the firm's control (e.g., regulatory approvals) and a firm believes a different schedule for completion is necessary for one or more current or planned future actions, the firm should provide detailed support for that schedule, and the Agencies will determine on a case-by-case basis whether a different schedule is consistent with the requirements of the implementing rules." If the firm is facing an impediment in meeting the Guidance or believes it will be unable to meet the Guidance by July 1, 2018, the firm should present detailed support to the Agencies as soon as possible as opposed to waiting until submission of the resolution plan on July 1, 2018