Tag: Covid-19

What challenges does remote working present for risk management?

Like in any transition, there are known and unknown challenges ahead. The Covid-19 pandemic has meant the majority of office based workers are having to relocate their day to day business activities to their homes. Remote working has a vast amount of challenges for all involved, but particular concerns for risk management include:

Day-to-day operational activities

The first one is linked to day-to-day operational activities where financial institutions need to ensure an appropriate approach to working remotely, taking into account their respective risk culture. This is not just about having a stable connection and being able to join busy, back-to-back video calls throughout the day, but rather rethinking how teams retain their risk management culture and capabilities, whilst having to integrate different levels of stress and disruption originating from the pandemic. For example, the risk culture within an organisation is likely to be weakened due to reduced interactions, fewer informal chats or one-to-one sessions with SMEs, which we know have been critical in shaping stronger risk management cultures in the last 10 years. This is particularly relevant among more junior team members and new joiners.

Cyber risk

The second challenge relates to cyber risk. As remote working becomes more established, exposure to cyber risk will increase. I don’t believe that the industry has yet had the opportunity to test all frameworks and capabilities developed over the last few years, so it will be interesting to check how well some banks will do compared to others. It will also be interesting to see how regulators look at it, particularly in light of the recent operational and business resilience regulatory initiatives.

What impact will the pandemic will have on IFRS 9 modelling?

To put it mildly, the pandemic may have tested the IFRS 9 models to their limit. In the short term, it has triggered the need to review and re-calibrate models. In the medium term, it could well prompt structural changes to the way provisioning is estimated and managed. I think we are still learning to navigate through these strange times so let’s wait and see.