Business Continuity Planning for Government Cash and Debt Management

BCP - Sept 22
Posted by Emre Balibek, Ian Storkey, and H. Hakan Yavuz[1]

Cash and debt management operations are core “transactional” functions of public financial management. These functions, by their nature, are exposed to a complex set of operational risks. Business disruptions to government cash and debt management operations can have spill-over effects on the delivery of government services and prevent the efficient functioning of financial markets. For example, a government bond auction that fails because of an outage in the electronic auction platform, may have serious financial and/or reputational consequences for a nation’s financial system.

The COVID-19 pandemic has reinforced the importance of business continuity plans (BCPs) for cash and debt management. As governments around the world announced policies to mitigate the socio-economic impact of the pandemic, government treasuries had to meet additional liquidity requirements imposed by the pandemic. The pandemic has highlighted the shortfalls of existing BCPs which are geared towards shorter disruptions, focus on protecting processes from system failures and data losses, and do not cover the challenges of prolonged working from home. In addition to the pandemic, the implications of technological advances (such as digitalization) for business processes, an evolving set of challenges (cyber risks and others) and emerging risk mitigation options (teleworking, cloud technology, etc.) are also prompting government treasuries to rethink their BCPs.

For developing countries, preparing a BCP still remains a practical challenge. Studies show that many low-income and developing countries have not yet developed and implemented a comprehensive BCP that covers critical processes in cash and debt management. The documentation requirements of BCPs are often excessive, and BCPs can become quickly outdated. Further, solutions set by BCPs may be unrealistic and unreflective of what would actually happen in a crisis that leads to significant business disruption.

The IMF has recently published a Technical Note and Manual (TNM) that provides guidance on the steps that government cash and debt management units can follow to develop and implement a practical BCP that economizes on the resources needed. The Note also discusses the evolving nature of business disruption risks faced by cash and debt managers over the last decade as well as trends and remedies that have emerged.

Country experiences on BCP highlight several key lessons and principles for government treasuries:


[1] Emre Balibek is a Senior Economist at the Fiscal Affairs Department, IMF. Ian Storkey and H. Hakan Yavuz are independent consultants.

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