COVID-19 and UK financial services firms: top 10 tips for senior managers

The COVID-19 crisis raises novel issues for senior managers at financial services firms. 

We set out our 10 top tips for how senior managers should respond to the crisis in the way they discharge their oversight responsibilities:

1. A collective integrated response is essential

No one senior manager is expected by the Financial Conduct Authority (FCA) to have full oversight of the extent of the impact of the crisis on the firm and how the firm responds. 

Individual senior managers remain responsible for their individual areas of responsibility, but a collective effort of the senior management team under the leadership of the CEO or equivalent senior manager will be critical to delivering a more integrated, considered response. 

Given the fast-moving nature of the crisis, regular virtual meetings of senior management could be scheduled to identify new developments, understand regulatory expectations and the impact of policy decisions on the firm’s business, and to set the firm’s overall strategy on responding. 

This is important where potentially competing interests need to be balanced – for example the need to ensure the firm is managed in a financially sustainable manner and the need to support business through the crisis where there may be doubt as to whether they will receive sufficient state support to survive. 

Records should be kept of the key decisions taken at such meetings to demonstrate how the management team has responded and what key issues were considered.

2. Operational resilience

The FCA has stated that 'Firms should take all reasonable steps to meet the regulatory obligations which are in place to protect their consumers and maintain market integrity'.

The senior managers with responsibility for operational resilience should consider the information and matters raised in the FCA’s open consultation on operational resilience. 

Such senior managers should be able to show that they have considered the FCA’s recommendations and, where they are not followed, that the firm has good reason not to. In particular, all senior managers should have a documented absence cover.

Best practice at this stage might be to either keep a handover note on key issues or keep the cover manager copied into email correspondence. 

Consideration should be given to how to cover mass absences within teams, for example cross-training employees from different teams or regions. 

Committees (eg the credit committee) may wish to appoint cover personnel to ensure decisions can still be made in the event the original committee is non-quorate.

3. Clear and strong message on customer focus

The senior management team needs to articulate clear principles on how customers and clients should be treated during the virus outbreak.

This will involve balancing prudential considerations against political and regulatory expectations that financial services firms will support businesses and consumers through the crisis, and ensuring that the difficult and important judgement calls in this regard are appropriately escalated.

These principles could then be articulated through training, such as using example scenarios, to help customer-facing staff understand the institution’s approach.

4. Positive contribution

Senior managers at large firms can expect (and should be prepared for) ongoing intensive dialogue with their regulators about the impact the crisis is having on their employees and business, how they are dealing with that impact, and how they are contributing as a firm to society’s response to the crisis. 

Regulators will be expecting senior management at these firms to show leadership and to promote how their firm is working to ensure that critical financial services functions continue to operate smoothly and support the real economy to the benefit of all.

5. Vigilance is more important than ever

Enforced home working for the vast majority of employees makes it harder to maintain oversight of employees and the systems they are using, leading to increased risks of market misconduct, fraud and cyber-security breaches. 

Senior managers should consider what reasonable steps they can take to ensure that conduct risks continue to be appropriately managed. 

This may entail changes to monitoring systems, messaging from management about conduct risks arising from the crisis and testing of unusual trading patterns or performance post the introduction of more extensive home working.

6. Duties towards employees

The FCA summary of expectations encourages firms to look at the risks to their employees. 

As a starting point, this is likely to include risks to their health and safety, and it is likely to be necessary to make significant efforts to enable employees to carry out their roles from home if they are not doing so already (including by putting in place appropriate IT solutions and practical workarounds for tasks that would otherwise require the employees to be office-based). For more information, see the FCA statement to senior management in relation to work-related travel. 

While some risks to employee health can be mitigated, for example by home working, this can bring other risks to employee wellbeing. 

Discharging the duty of care owed to employees may include scheduling regular check-ins with all employees by team leaders using video conferencing where possible, as well as consideration of access to counselling or advice on absences due to childcare or carer commitments.

7. Maintaining a focus on culture

Linked to points 5 and 6 above, firms should maintain a focus on culture and its importance as a risk management tool. 

Employees may find themselves under significant pressure in the coming days and weeks, responding to market volatility and challenging conditions in their personal and professional lives. 

Ensuring that they receive regular reminders of the firm’s values and acceptable standards of behaviour, that they are rewarded for adherence to those values and that they receive the appropriate support and example-setting from senior management, will be more important than ever.

8. Business as usual

In the heart of a crisis it is easy to forget on-going responsibilities. Senior managers need to ensure regular attention is given to their usual role or, where this is not possible due to urgent issues, it is documented that this responsibility has been either delegated to another (with appropriate oversight) or has been delayed and that this delay is not considered business critical.

9. Planning for the future 

While the implementation of some new requirements has been pushed back by the regulators to provide breathing space for firms, these are temporary delays only. 

Other deadlines including the end of the Brexit transition period remain unchanged. 

Therefore senior managers leading implementation projects need to continue with their work on such projects and consider how the new working environment might impact their plans. 

For example, those planning to relocate staff prior to the end of the Brexit transition period may need to have contingency plans in place in case travel restrictions still apply.

10. Looking back

Senior managers need to be confident that decisions made under pressure in these times of crisis withstand future scrutiny by regulators or the courts. Sensible record keeping of decisions taken and collective discussion is key. 

New methods of review and checking of compliance by employees need to be implemented, such as team viewing, structured video conferences and retrospective reviews.