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Sibos 2020: A mindful shift to operational resilience is required in a post-Covid world

Sibos 2020: A mindful shift to operational resilience is required in a post-Covid world

2020 has been a sharp reminder that unprecedented events can result in abrupt, yet long-term change and every industry must adapt to keep pace. The challenges facing banks are continuing to mount and financial institutions are being forced to deal with a deteriorating geopolitical environment, an explosion in cyber-crime and the expansion in regulatory oversight, as discussed in Sibos day three session ‘Risk management: The world of worries’.

Isolationism, trade conflict, military engagement, sanctions and protectionism have all returned to the global agenda. The impact is considerable - new and expanding sanctions and cyber risks, unknown and uncertain international terms of trade, alongside increased due diligence, transaction monitoring and reporting requirements.

When is all this going to be over?

Experts from Standard Chartered Bank, Federal Bank, AWS, Pay.UK and CLS discuss how organisations can plan for uncertainty and develop strategies to be ready when the worst happens. Razia Khan, chief economist for Africa and the Middle East, Standard Chartered Bank, kicks off proceedings with comments on the future strength of the economy, questioning when “all this is going to be over.”

Central banks in developed markets and emerging markets alike are moving to cut interest rates rapidly, giving practical relief to financial institutions and trying to find a way to safeguard low growth. Many governments themselves coming up with loan guarantee schemes and trying to channel credit to small and medium enterprises.

“We know that fiscal policy settings have been geared towards restoring demand as quickly as might be possible; we know the starting point for this has been very different. Some economies, perhaps with deeper, more liquid markets, longer more established developed economies that have many more choices available to them, in terms of how they deal with this crisis, have been limited,” Khan explores.

Later, she adds: “A key question that we all have to contend with is, are we going to see a fundamental disruption to what we've taken for granted, the ability to trade in a smooth way with a shoulder, the ability for everyone to share in one global prosperity?” How quickly is the adaptation going to happen? Is there a more environmentally friendly way to being able to drive growth outcomes in the future?

Resilience is key

Deborah Hrvatin, chief risk officer, CLS agrees that the industry is facing challenging times and no organisation, startup or established company has easily adapted to these circumstances.

Therefore, mitigating risk is of paramount importance; Hrvatin explores how previously, there was an increased focus on basic models, historical data and prevention in business continuity plans. Now it's about operational resilience.

“This has become a key agenda item for the board and senior management: increasing complexity and processes, technology, dependence on our third parties’ interconnectedness and data sharing, and the sophistication of our malicious actors and disruptions more likely, and their impact much more.

“Severe operational resilience is about interrogating considering what risks could emerge, and then setting up the right framework and essential elements to ensure business continuity, regardless of the type of disruption. It focuses on the dependencies and the requirements for providing critical business services into it, avoiding organisational silos, and it requires a mindful shift in the organisation that is everyone's responsibility to meet.”

Following on from Hvartin’s mantra that “we are all risk managers”, Helen Hunter-Jones, chief risk officer, Pay.UK also reiterated Covid-19 must be seen as a “catalyst for change” and “robustness and resilience” are key.

Resolving the resilience issue

Shalini Warrier, executive director, Federal Bank offers her view and states that what should be noted is that the topic of risk management is not confined to one geography or one country.

“If you go back in time to 2008 when the financial crisis occurred, the banks could be considered the reason for that crisis. Today, banks are definitely not the reason for the recent crisis.”

She goes on to say that “banks have come to the front of the crisis to handle the aftereffects and work on resolving issues.” 2008 was not as pervasive as 2020, everyone has been impacted - the world has become more intertwined, complexity is much higher.

Every crisis has its own set of opportunities and strategy should remain at the fore, and human at the core, Warrier says.

Anastasia Raissis, director of worldwide financial risk and economic development, AWS explores the relationship between risk management and innovation, and how the latter can change both behaviour and expectations. In these uncertain times, the regulatory pressures around establishing a ‘best in class’ risk management programme have been ramped up and cloud can support this, as she explains.

“We’re in the midst of a titanic shift to the cloud, and there are a couple reasons why people are moving so quickly. The first is cost. With the cloud, you don’t have to lay out the capital up front for the servers and the data centres, and you instead get to pay for it as you consume it as a variable expense.”

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