Understanding impact tolerances: How severe is severe?

Nita Kohli

Impact tolerance statements are pivotal in defining the threshold at which a service undergoes intolerable harm. In short, they highlight the level at which a service faces severe compromise, resulting in significant impact. In this chapter, we explore the framework for establishing impact tolerance statements, delving into the intent behind regulatory requirements and providing practical examples to illustrate their application.

The Supervisory Statement (SS1/21) issued by the PRA, and updated in March 2022 with implementation required by March 2025, focuses on impact tolerances for critical business services. It outlines expectations for firms’ operational resilience, mandating the establishment of impact tolerances for these services. The statement defines operational resilience as the capacity of firms, and the financial sector as a whole, to prevent, adapt to, respond to, recover from, and learn from operational disruptions. This definition triggered a transformative shift across industries, redirecting the focus from internal process recoverability to the maintenance of services and the minimisation of harm to clients, consumers and the external market. Understanding the