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A view from the First Line: how risk governance needs to change after Covid-19

September 10, 2020

On 3 September, The London Institute of Banking and Finance hosted a webinar to discuss how risk governance needs to change after Covid-19. The panel comprised risk experts from the first, second and third lines. In today’s blog, Cosette Reczek, who has over 25 years’ experience in financial services, summarises her key points from the webinar where she discussed her view from the First Line.

As banks begin to enable the return of some staff to the office, now is the right time to consider how risk governance needs to evolve to consider experiences gained from Covid-19.

When the virus struck with full force earlier in the year, banks (and other companies) needed to be responsive not only to their own vulnerable but also to the needs of those everyday clients who required products and services adapted to the challenging current environment.  The many changes made by banks, in the last six months, to the way they work now need to be evaluated to determine if they are temporary or should be permanent modifications.  In turn, policies, procedures, and internal controls need to be revised to best support these new offerings.  

As bank staff continue to work remotely, their interaction with clients have been fundamentally changed.  Surveillance, recordings, treating customers fairly and evidence of best execution need to be continually reassessed to be in compliance with regulation and transparent to all parties.

Across these activities, there may also need to be technology improvements to bring relief to any manual ways of working, including renewed consideration of operational resilience, increased risk of online fraud and new opportunities for cyberattacks.

Staff wellbeing continues to be a prime focus both for those returning to the office as well as those continuing to work remotely, as is the need to maintain a healthy culture when many staff may not be office based.  In addition, rosters must be kept up to date to ensure that any leadership voids created by illness can be immediately addressed, including those in Senior Manager roles where regulatory approval for any changes is required.

With continued uncertainty ahead of us, contingency planning and agility will be major considerations.  Organisations will need to be mindful of the need to protect staffing levels – for example, through operating ‘A’ teams and ‘B’ teams which are kept physically separate – and the need to be able to ‘flip’ between times of more ‘normal’ working and possible complete returns to remote working should the virus spike again or a second wave occur. 

All these are areas that the ‘first line’ should be considering – but the ‘second line‘ risk function and the board risk committee will also need to consider their oversight role in the new environment.  The Risk Coalition’s Raising the Bar provides a very practical framework for board risk committees and risk functions to help organisations in financial services do this.

The new environment requires not only articulation of the risks faced in these recent months but also a forward-looking view of how risks will be managed by the first line and overseen by the second line and the board risk committee within this new context.  More importantly, it is an opportunity for banks to examine ways to embed these new ways of working, evolving their culture and conduct practices in the process.

Cosette Reczek – Founder, Permuto Consulting Limited

Tags: Cosette Reczek
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