White Papers

COVID-19: Initial Lessons Learned and Considerations for Managing a Global Pandemic

Summary

In this report, COVID-19: Initial Lessons Learned and Considerations for Managing a Global Pandemic, SIFMA and Protiviti discuss the range of issues and events accentuated by the global coronavirus pandemic and the financial industry’s multifaceted and effective response thus far. We identify key lessons learned to date from managing this crisis, weighing the benefits and disadvantages of various responses and approaches, and provide key considerations that should be top of mind for business leaders as they strategize over how to build resilience and thrive in this new environment.

PDF

Date

19

October

2020

Excerpt

Executive Summary

White Paper: Initial Lessons Learned and Considerations for Managing a Global PandemicThe novel coronavirus (COVID-19) pandemic has been unsparing in its impact around the globe. Beyond the direct and severe health and wellness impacts experienced over the past six months, how we live and work have changed in ways many would have previously considered unthinkable.

The financial sector and the capital markets have adjusted to the impacts of the pandemic, making a broad range of changes to their operating models, use of technologies and market activities. The direct operational impacts of a shift to remote work were compounded by a period of extraordinary market volatility as the outbreak first took hold in Asia Pacific and eventually reached the United States. The market volatility and economic dislocation, largely driven by measures initiated to contain the virus, created liquidity, capital outflow, supply chain, regulatory and operational challenges for financial institutions of all sizes and types, including broker-dealers, investment banks, asset managers, and clearing and settlement institutions.

Even with these obstacles, the financial industry kept markets running, provided businesses with much-needed liquidity during a time of severe stress, continued to serve and advise clients, and ensured timely clearance and settlement activities.

These achievements were not without challenges. Indeed, COVID-19’s continuing impact has taught the financial industry many things about resiliency – and we expect the list of lessons learned to continue to expand as the crisis stretches on. For now, embracing agility and technology enablement in the workplace; managing third-party, cyber and concentration risks proactively; enhancing customer security and privacy protections; building stronger governance and processes around crisis management and communication; and developing financial discipline across the enterprise, are just some of the key considerations that should be top of mind for financial services leaders.

While much is being learned in real-time from COVID-19, the pandemic has also reaffirmed many of our expectations around pandemic risk management. For instance, we know preparedness for a pandemic requires the establishment of infrastructure and capacity, a process that can take years to build. Pandemic preparedness presents many unique challenges due to the significant uncertainties around scale and duration of impact. To be effective at mitigating such a severe but plausible event, institutions should continue to enhance their pandemic and business continuity plans, as well as test and exercise those plans, recognizing that COVID-19 did not produce certain worst-case scenarios (such as a 50-percent incapacitation of staff due to illness or death) that some feared were possible and that could happen in future pandemics.

Government leadership and support are paramount during a pandemic. As COVID-19 has shown, in the event of a pandemic, the full participation of all levels of government and all segments of society is a critical part of the response. It is in this spirit of collaboration and shared objectives that the financial sector and governments around the world have been working together on various types of regulatory relief needed to mitigate the financial and operational impacts of the pandemic.

In this report, we discuss the range of issues and events accentuated by the pandemic and the industry’s multifaceted and effective response thus far, efforts that leaned on a crucial pandemic exercise that SIFMA and the Financial and Banking Information Infrastructure Committee (FBIIC), the Financial Services Sector Coordinating Council (FSSCC) and the U.S. Treasury organized in 2007. We identify key lessons learned to date from managing this crisis, weighing the benefits and disadvantages of various responses and approaches, and provide key considerations that should be top of mind for business leaders as they strategize over how to build resilience and thrive in this new environment.

In the report, the lessons learned from the pandemic and the key considerations for leaders are categorized under several themes, as illustrated below.

Go-Forward Operating Model

  • Building a Remote Workforce of the Future
  • Enhancing Resilience of Global Operations
  • Optimizing Operations through Automation
  • Modernizing the Regulatory Landscape

New Risk Profile

  • Ensuring Employee Health and Wellness
  • Reassessing the Changing Security Landscape

Enhanced Response and Recovery

  • Enhancing Communication and Coordination
  • Building Operational Resilience

Some of the key considerations in the report are summarized below:

  • Health and wellness of the workforce should be a paramount consideration in the formal risk management structure of organizations, alongside enterprise, operational, financial, and IT risks.
  • Firms should consider conducting an after-action analysis of what went well and what did not with respect to their work-from-home (WFH) capabilities. Some firms may benefit from adopting a hybrid workforce model, if done so in a thoughtful and secure manner.
  • The benefits of maintaining globalized operations were tested in this crisis. Going forward, and inclusive of supporting third parties, these systems need to embrace operational resilience strategies and practices to increase their robustness, identify geographic and vendor concentration risks and minimize the risks of failure.
  • It is important that firms invest in and embrace automation and critical digital tools, particularly to support operational areas where downtime risk could be most severe.
  • The industry should continue to collaborate with regulators to put in place critical regulatory relief during the pandemic, including forms of relief that would promote working remotely, trading virtually, and extending the filing deadlines for statutory reports. This also means institutions should continue to pay close attention to forthcoming regulatory guidance to stay current on new requirements.
  • As the industry returns to normal working arrangements, firms should work with regulators and infrastructure providers to identify opportunities to make permanent the more efficient operating models adopted during the pandemic. This include moving away from requirements for physical documents and communications, such as dematerialization of physical securities and moving to e-delivery of client communications.
  • Institutions should continue to build stronger technical infrastructures, with emphasis on countering the escalation in cyber threats due to many employees working from home.