How would you describe the impact of COVID-19 on your business?
Seventy-three percent of respondents in the financial services industry were from North America or EMEA, and 17% were from LATAM. Overall, this industry had a smaller proportion of respondents who said they were in the react phase (12% compared to the average of 20%). A higher percentage of respondents in financial services reported that their companies included a pandemic as a key risk prior to COVID-19 (25% compared to the average of 18%), and financial services shows the highest percentage of respondents (51%) whose companies had a pandemic plan in place prior to COVID-19. Nearly half (45%) agreed that their businesses were affected by the pandemic but remained resilient. More than half (57%) of respondents expect the impact to last for one to two years. Three-quarters (75%) of respondents said their supply chain was not impacted by the pandemic. All respondents said their risk management response efforts were sufficient. However, 25% suggested that additional planning would have been beneficial.
The regulation within financial services and the application of lessons learned from the 2008 financial crisis appear to have assisted this industry in remaining resilient during the pandemic. This resilience is probably associated with the industry’s increased risk maturity, which enabled companies to plan for liquidity and capital management. As a result, the industry was able to respond proactively to support private and commercial customers that were dealing with the economic consequences of the pandemic. Wellbeing continues to be a significant priority for a number of reasons. Like other industries, financial services adapted quickly to remote working and maintained productivity. However, this shift has had an impact on employees. The change of dynamic from the office — or, in the case of retail banks, customer branches — has created mental-health challenges. Across the industry, employees continue to be under pressures that can lead to burnout, health issues and absences. In the worst cases, this has the potential to affect employee behavior. The employee value proposition is important to ensure balance and retain talent. Companies need to adapt to the competitive landscape through disruptive cryptocurrency and technology-based solutions.
"The acceleration of digital working enabled many financial services companies to remain resilient during the pandemic. The pace of change has presented ongoing challenges in the form of employee wellbeing, with increased risk of health and wellbeing issues. This has potential to present heightened security risks, either through remote working cyber vulnerability or through negative behaviors associated with affected employees. The risk of financial losses is still high on the agenda owing to increased volatility of financial and non-financial risk. This includes the increased potential for credit default as macro conditions deteriorate, litigation risk and intellectual property or reputation risks."
- Daniel Butler, EMEA Financial Institutions Industry Leader & Head of Financial Institutions Risk Advisory
Business strategy review is a priority in this industry as organizations try to apply the lessons learned from the pandemic. Legacy assets, principally property, may be rebalanced as financial services look to move to a more agile service model. A number of established structural frameworks will be under review as organizations consider how they can develop a lean, efficient customer-focused model while maintaining regulator confidence and compliance. Operational resilience continues to be a priority to ensure that financial services companies can meet regulator mandates. A key future risk in this industry relates to technology and cyber events. The increased reliance on technology and new business models creates the potential for vulnerabilities that could be exploited without careful risk management. The rise in both sophisticated, state-sponsored cyberattacks and cybercrime during the pandemic mean this will be a key risk for the sector.
- Economic disruption
- Technological disruption
- A major cyber event
- Business model disruption
- Geopolitical tension