Financial services regulation and COVID-19 video diaries: Insights one month after lockdown

Hi and welcome to the latest in our series of financial services video diaries. In this edition, I am joined by my colleague Iain Hawthorn in our risk consulting practice here at Norton Rose Fulbright.

Now having been in lockdown for a little while now, today we would like to talk you through some insights and perspectives that we are seeing across the markets. I would like to start by discussing four key overall areas of note.

Firstly, the key importance of regular ongoing governance meetings at firms, to take discussions and decisions and evidence those; secondly, ensuring that plans continue to be dynamic and agile so they are fit for purpose over time; thirdly, properly factoring in accountability frameworks so decisions made can be evidenced and also escalated where appropriate, with evidence of them being done so; and fourthly, communication is very, very important across all groups, staff, customers, regulators but also including care around public communications and how they go out.

We would like to break these down into some short-, medium- and longer-term factors and within these, I stress the importance of care around how regulatory guidance is applied especially in a rapidly changing environment that we have at the moment and also being mindful and ensure that customer detriment is not caused or built up over time.

Thanks, John. So kicking off with the short term. The focus has very much been about responding to the pandemic and in actioning crisis response plans and, as part of this, there have been five themes that have been coming out.

Firstly, modifying the ways in which customers might do business with you, to keep both them and your staff safe and we have seen various examples of this including redirecting customers to channels which reduce person-to-person contact, such as telephony, online and app-base services, or putting in place physical barriers or screens between staff and customers in branch-faced environments.

Secondly, ensuring that there are appropriate resources in place to continue to serve customers well and this is particularly the case across those channels that you may be redirecting customers towards. Some of the firms we have spoken to have seen a ten-fold increase in customer contact by telephone over recent weeks. Therefore, redeploying and retraining staff at pace to handle this increased customer contact in the short-term has been key. 

Thirdly and this may seem obvious, ensuring that staff have the capability to work from home is important and this is not just about having a VPN connection that is sufficiently robust but also that staff have the appropriate hardware so laptops, headsets, monitors, etc., and also the ability for interactions with customers to be recorded and overseen are also important.

Fourthly, responding to regulatory guidance and modifying processes and oversight arrangements as a result is also important. There has been a range of communications from regulators over the past month setting out their expectations of firms and firms have had, in some cases, only a matter of days or weeks to respond and to modify processes as a result.

Fifthly, governance and oversight arrangements are more important than ever. So having appropriate MI and reporting in place to give relevant committees line of sight over these factors is key, as is the ability to be able to demonstrate reasonable steps. So how and why were decisions reached through accurate minute taking and action tracking on the back of this?

As we move to the medium-term, a couple of things to think about. Listening to feedback is important and this should be from both staff and customers. This can provide really valuable information to further inform your strategy in response, to build on what is working well and change those that are working less well. From the customer perspective, looking at complaint trends and root causes is particularly valuable in this regard and then acting on these matters promptly. 

Next, it is really important to consider the medium- to longer-term impact on the welfare and morale of staff as the pandemic progresses. Many people are used to working in close proximity to colleagues or as part of a team and the move to social distancing and home working can cause challenges. Maintaining connection through technology, whether this be through regular team get-togethers or on Skype or Zoom for social activities such as quizzes can really make a big difference in maintaining a strong team spirit. 

Next up. Giving thought to what a gradual transition to a more pre-crisis BAU way of working is important. So thinking through things such as the criteria that need to be met to enable this to happen and what this could look like in practice are worth considering.

We have spoken to firms who are thinking through the implications of what a phased return to the office could look like, with teams returning on a shift basis for example, but only when it is considered safe to do so.

Regulatory expectation and guidance is continuing to evolve, therefore ensuring that risk and governance policies continue to be fit for purpose and aligned to regulatory expectation as these matters continue to evolve is a key medium-term consideration.

Finally, in the longer-term, a couple of other things to think about. Customer outcomes in the longer-term are important. Clearly, practices need to be fair but a balance needs to be struck with this and acting in the customer’s best interests, particularly when considering matters such as repossession.

Continuing to scenario plan and test based on accurate and reliable information is important and gradually starting to initiate transitions to a more pre-crisis BAU way of working when it is safe to do so is something to think about and, finally, at an appropriate point, think about learning the lessons from the experience of the crisis and how these are captured in a structured way to enable challenges in a similar situation, which we hope not to see for a very long time, can be overcome and those things that have worked well are built on and further strengthened.

So that is all from John and I in this video, we hope you found it useful and do get in touch if you would like to discuss further.