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THE SUNDAY TIMES - "How Risk Became a Live Issue"

Read what co-author Keith Webb, a Director of Business Risk Consulting at Xcina Consulting, had to say in a recent Sunday Times article about the impact of COVID-19 for the resilience of financial services.

'COVID-19 is testing the resilience of the financial services sector.'

Maria Singende, IRMCert, risk manager at Barclays Bank, and Keith Webb, director of consulting, business risk at Xcina Consulting, speaking on behalf of the IRM Financial Services Special Interest Group.

As with most other industries, COVID-19 has taken no prisoners in financial services. The impacts are broad and varied: financial and crypto markets in free fall; potential widespread credit defaults; insurers potentially forking out for business interruption; or just general resilience issues, particularly where there are dependencies on third parties both local and foreign.

Financial services firms are continuing to support firms and individuals, albeit in a disrupted way, through transactional banking, savings, loans, insurance, mortgages and complex electronic payments infrastructure that together underpin domestic and international activities.

Let’s take a few examples. Banks are increasing the availability of loans while at the same time bracing for significant credit card losses as cash-strapped customers may be faced with rising unemployment, furloughing and salary cuts. Similarly, insurers are supporting customers while facing uncertainty around potential outlays for travel or business interruption. There may actually be opportunities to further the digitalisation of current processes that have so far evolved slowly.

In addition, governments around the world have announced significant emergency funding initiatives for people and companies. These funds will be distributed through existing electronic financial payments architecture.

COVID-19 is testing the resilience of the financial services sector. It remains vital for individual firms to assess their own capability and capacity for operational resilience and mitigation strategies. Firms have activated their resilience plans, triggering urgent risk responses to all risks, including ones in relation to third parties which are critical dependencies for many firms.

Key considerations include: operational resilience and business continuity; cybersecurity and data security; and continued regulatory compliance. Enterprise-wide risk management frameworks in financial services firms have been instrumental in helping firms manage these considerations in alignment and to respond appropriately.

Firms’ contingency scenarios may never have planned for something with so much disruptive effect. There are significant changes and challenges – some shared some specific. Examples include: care arrangements for family, parents and children; remote working; virtual meetings; relative isolation; working arrangements; and working hours.

As a result, banks are already facing massively increased demands for emergency loans. For example, NatWest (the UK’s biggest business lender) reported that they have received nearly ten times as many calls as usual from firms that are struggling.

Risk managers with the right qualifications, such as the IRM’s International Certificate in Enterprise Risk Management, and experience are helping in the close monitoring of the risk profile to inform important decisions on risk appetite as well as what action to take around liquidity and capital adequacy. Professionally conducted risk assessments, monitoring and reporting have proven crucial for these firms.