Embracing a Challenging Environment to Evolve

New York University economist Paul Romer once said, “A crisis is a terrible thing to waste.”

With a nod to Dr. Romer, we believe banks have an extraordinary opportunity to embrace the challenging environment created by the Covid-19 pandemic to enhance critical housekeeping matters. Here are five areas where banks may find opportunities to declutter or reengineer policies, procedures and best practices.

Culture
One of the most obvious opportunities for banks is to focus on culture. Employees working from home has eliminated the ability to have typical office parties, barbeques and other events to build comradery. Remote and semi-remote working environments are challenging employees in many difficult ways. Fortunately, banks are finding simple, yet creative, ways to stay in contact with their employees and build culture through additional correspondence and feedback — electronic happy hours, car parades, and socially distant visits, for example. Creatively maintaining high engagement in challenging times will serve to improve communication and culture over the long term. As management consultant Peter Drucker once said, “Culture eats strategy for breakfast.”

Cybersecurity
Cybersecurity risk continues to be top of mind for bankers and regulators given the remote work brought on by Covid. Certainly, most banks’ cybersecurity risk management planning did not contemplate the immediate scale of remote work, but the extreme experience is an opportunity to drill down on underlying policies and procedures. Banking agencies have provided the general blueprint on sound risk management for cybersecurity.

This heightened risk environment provides executives with a perfect opportunity to note where their vulnerabilities may exist or be discovered, where cyberattacks focus and what works—or doesn’t —for your bank. Use the guidance provided to assess your bank’s response and resilience capabilities. Consider the overall map and configuration of your cyber architecture. Consider authentication requirements and permissions to protect against unauthorized access. Take the time to work with information technology experts to clean up access controls and response plans. This is an active situation that provides bankers the unique opportunity to learn and adapt in real time.

Compliance
Banks also face enhanced compliance originating from federal programs aimed at keeping businesses afloat. A worthy endeavor to be sure, but the rollout of some federal programs such as the Small Business Administration’s Paycheck Protection Program has far outpaced the guidance for banks tasked with implementation. The trickle of (often inconsistent) guidance on the documentation, eligibility and certification adds compliance challenges in reporting under the Bank Secrecy Act, fair lending under the Equal Credit Opportunity Act and unfair or deceptive acts and practices under the Federal Trade Commission Act, for example.

Compliance teams have an opportunity to shine at something they are already extraordinarily good at: documentation. They should document the processes and practices they deploy to demonstrate compliance, despite the uncertainty and pace at which they are expected to operate. This documentation can support real-time decision-making that may come up with regulators in the future, and can serve as a basis for improvement on future best practices and training. Compliance teams will discover new questions to ask, novel scenarios to address and gaps to fill.

Operational Planning
The best time to consider the impacts of Covid on your bank’s operations is while events and memories are fresh. Banks all over the country are experiencing what a handful of institutions may go through in the wake of a natural disaster: devastation, uncertainty and a need for banking support. This is the time to review your bank’s disaster recovery and business continuity plans, specifically including pandemic planning, to assess the plans against reality.  

To help, the Federal Financial Institutions Examination Council released an updated statement on pandemic planning suggesting actions that banks can take to potentially minimize a pandemic’s adverse effects. This is an chance to improve business continuity planning for similar future events, understanding that they may not be as deep or prolonged as the coronavirus. Exercising the plans in real time, compared to a scheduled test, can reveal helpful improvements that will only strengthen the bank.

Customer Experience
Coping with remote work and providing banking services outside of a branch provides the opportunity for banks to consider strategies around technology and financial technology partnerships. Customers have been rerouted to electronic avenues, and many seem to have embraced technology to deposit checks, access accounts online and transact business.

This evolution offers banks the opportunity to adapt and recognize the use of financial technologies. Many customers will understandably return to branches to conduct some of their business when they reopen, but may require them less. Banks may want to consider how they can satisfy future customer demand and improve the customer experience more broadly. These are just five areas where we see opportunities for banks of all levels and complexity to enhance their policies, procedures and best practices as they prepare to move forward.