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:
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:
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?
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.