April 3, 2020 | Posted by Michael Berman
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4 Minute Read

The rest of our series:

Part 1: Human Resources

Part 2: The Frontline, Back Office, & Marketing

Operational resilience is about more than business continuity management (BCM). It’s about having a strong governance and oversight structure. It’s about ensuring decision making is strategic and well informed.

At financial institutions, that’s the job of the board and management.

As COVID-19 spreads across the country, boards and management are making critical decisions to adapt to changing conditions. In addition to understanding what each individual area of the FI is doing to respond to the crisis and maintain operational resiliency, they are also high-level risks that can only be addressed by top leadership.

In this third blog in Ncontracts’ series breaking down key operational risk considerations for the COVID-19 department-by-department, we’re talking about the board and management.

BCM: What Board & Management Need to Consider Right Now

When it comes to the operational risks of coronavirus, the board and management’s goal isn’t just to put a band-aid on the situation. It’s to assess operational risks in terms of how it will impact the FI’s strategic direction moving forward.

It’s imperative that the board and management ensure that any decisions made align with the FI’s goals, mission, and vision. This allows the board and management to allocate resources to the most pressing risks.

When assessing the operational risks of COVID-19, the board and management should factor these considerations into BCP decision making:

Financials.

Most FIs had a positive financial outlook for 2020 until COVID-19 emerged. Now it’s likely FI’s will be reassessing projections and shifting resources to more immediate concerns. Long-term goals not immediately related to COVID-19 response may be put on the back burner. Areas to think about include:

  • Liquidity
  • Earnings
  • Budgeting and spending on operational resilience
  • Impacts on mergers & acquisitions
  • Changes to tax policy & financial reporting
  • Impact of cost reduction efforts
  • Capital investment strategies
Personnel.

COVID-19 is highly contagious and has killed over 2,000 people in the U.S. so far. This raises the specter of risk no one likes to talk about: that key staff might fall ill and even die. The board and management need to ask:

  • Do we have redundancy in our key positions?
  • What would happen if one of the key leaders was ill or died?
  • Is our succession plan up to date?
Vendor management.

Not every vendor is guaranteed to survive the crisis. The board and management need to know the status of critical vendors.

In particular, they need to know about any force majeure clauses, a contract provision that excuses a vendor from providing a service as promised. These clauses vary from contract to contract and may or may not include pandemics. It’s important to know where you stand financially if a critical vendor can’t perform. Ideally, if they can’t perform, your FI won’t have to pay and can deploy those funds to a stronger vendor.

Communication.

The board and management may not be able to get together in person, but they still need to meet. The board needs to think about:

  • How are employees staying informed of developments?
  • What procedures are in place for remote meetings?
  • What do the bylaws say about remote meetings?
  • Do we have the technology and training needed?
  • How often should meetings occur?
  • What are the regulators saying?
  • How are we communicating with customers?

For more insights into how COVID-19 is impacting operational risk and resiliency, join us for our webinar Unprecedented: COVID-19, Vendor Management and Managing the New Normal, on Wednesday, April 8, 2020 @ 2:00 PM CT.

Michael Berman

Michael Berman

Michael Berman is the founder and CEO of Ncontracts, a leading provider of risk management solutions. His extensive background in legal and regulatory matters has afforded him unique insights into solving operational risk management challenges and drives Ncontracts’ mission to efficiently and effectively manage operational risk.