BCP Testing Beyond Compliance for NCUA Credit Unions

Introduction

Your credit union conducts its annual business continuity plan test every year. The box gets checked. The documentation goes into a file. Everyone moves on.

But here's what NCUA examiners discovered in 2024: credit unions struggled with outdated risk assessments, underdeveloped incident response plans, lack of testing, vendor over-reliance, and unclear roles during crises. Business continuity and disaster recovery emerged as a major weakness across the industry.

That annual test your credit union runs? It might be creating a false sense of security rather than actual preparedness. And when 75% of companies without an effective BCP fail within three years of a disaster, the stakes couldn't be higher.

Why Most Annual BCP Tests Miss the Point

The majority of BCP failures stem from two critical shortcomings: underdeveloped recovery strategies and a lack of realistic testing. Credit unions often approach their annual test as a compliance exercise rather than a genuine validation of operational resilience.

NCUA examiners know the difference. They're looking for evidence that your test actually challenged your assumptions, revealed gaps in your plan, and led to meaningful improvements. A test that goes perfectly smoothly every year isn't rigorous enough—it's just theater.

The problem starts with how credit unions frame the objective. If the goal is "complete the annual test requirement," you'll design something simple enough to pass. If the goal is "validate that we can actually recover operations within our stated timeframes," you'll build scenarios that stress-test your capabilities.

Test Reality Check

If your annual test documentation shows zero problems year after year, that's a red flag. Effective tests should reveal gaps, not just confirm everything works perfectly.

Consider what happens during most annual tests. Staff members review the written plan, confirm contact information is current, maybe run through a tabletop discussion of a generic scenario. Everyone nods, the facilitator checks boxes on a form, and the test concludes successfully.

But did anyone actually attempt to restore systems from backups? Did you simulate loss of your primary facility and activate your alternate location? Did you test whether staff can actually access critical systems remotely when the network is compromised? Did you validate that your communication templates can be deployed within the recovery time objectives you've documented?

What NCUA Examiners Actually Want to See

NCUA's 2025 supervisory priorities emphasize information security programs and continuity of operations plans. Examiners will assess whether your credit union uses tools like the Automated Cybersecurity Evaluation Toolbox and reports cyber incidents within the required 72-hour window.

The updated FFIEC Business Continuity Management booklet—which NCUA uses as examination guidance—stresses enterprise-wide approaches addressing technology, business operations, testing, and communication strategies. Examiners want to see that management has prepared operations to avoid disruptions and recover services effectively.

NCUA's 2025 Focus

Examiners will assess information security programs, continuity of operations plans, and whether credit unions report cyber incidents within 72 hours as required.

What does this mean practically? Your test results should document specific findings, not just confirm everything works. Examiners expect to see evidence of gaps identified, issues raised, and corrective actions taken. If your test documentation shows zero problems year after year, that's a red flag suggesting the test isn't rigorous enough.

Examiners also look for independent validation. Your BCP and test results should be subjected to independent audit, not just self-assessed by the team that wrote the plan. Management's response to issues raised in previous examinations matters—examiners will review whether you've addressed outstanding items from past reports.

The Statistics That Should Worry Your Board

Research shows that 88% of companies test business continuity plans to identify gaps, and 63% do so to validate their plans. These aren't companies conducting tests to satisfy regulators—they're organizations using testing as a critical risk management tool.

The consequences of inadequate testing become clear in disaster statistics. Seventy-five percent of companies without an effective business continuity plan fail within three years of experiencing a disaster. For credit unions serving members who depend on access to their funds, this statistic represents existential risk.

But here's what should really concern your board: only 25% of credit unions actually practice their crisis plans according to industry research. Annual testing is required, yet meaningful practice remains rare. That gap between compliance and preparedness explains why NCUA examiners consistently find business continuity as a weakness.

Building Tests That Actually Strengthen Resilience

Effective testing follows a progression from simple to complex. Start with tabletop exercises where leadership teams walk through scenarios and discuss responses. These reveal gaps in understanding, unclear roles, and missing procedures without requiring technical execution.

Move to functional tests that validate specific capabilities. Can your IT team actually restore the core banking system from backups? How long does it take? What problems emerge? Document everything, including the issues that arise—those findings are the value of the test.

Testing Progression

Start with tabletop exercises, progress to functional tests of specific capabilities, and conduct full-scale simulations. Test different scenarios quarterly rather than the same generic test annually.

Full-scale exercises provide the most rigorous validation. These involve actual evacuation, invocation of disaster recovery sites, and no-notice activation to test realistic response. While complex to coordinate, full-scale tests reveal problems that tabletop discussions and limited functional tests never uncover.

Turning Test Findings Into Operational Improvements

The real value of BCP testing comes from what you do with the results. Credit unions that treat testing as a compliance exercise file the documentation and move on. Organizations that use testing strategically treat findings as opportunities for strengthening resilience.

Start by categorizing findings by severity and timeline. Critical gaps that could prevent successful recovery need immediate attention. Medium-priority issues should be addressed within 30-60 days. Lower-priority improvements can be scheduled into longer-term planning cycles.

Assign ownership for every finding. Who's responsible for researching solutions, proposing corrective actions, implementing changes, and validating improvements? Without clear accountability, findings sit in reports without driving action.

Summary

Annual BCP testing represents far more than a regulatory checkbox for credit unions. It's the validation process that determines whether your documented plans will actually work when operations are disrupted. NCUA examiners found business continuity and disaster recovery as major weaknesses in 2024 because too many credit unions approach testing as compliance theater rather than genuine operational validation.

The statistics are clear: 88% of organizations test to identify gaps, 75% of companies without effective BCPs fail within three years of a disaster, and only 25% of credit unions actually practice their plans. Your annual test needs to move beyond simple tabletop discussions to functional and full-scale exercises that stress-test capabilities, reveal problems, and drive continuous improvement.

Examiners want to see evidence of rigorous testing, documented findings, and corrective actions that strengthen resilience. When your next annual test approaches, ask whether you're checking a box or building genuine preparedness.

Annual BCP Testing Requirements: Beyond Checking the Box for NCUA