The impact of COVID-19 lockdown measures on firms' existing governance arrangements and controls cannot be underestimated. Overall, there is recognition that firms and regulators have fared reasonably well in response to the immediate impact. However, governance arrangements and controls need to be reinforced and enhanced in this new reality – where firms and regulators have been given an insight into how things can be done differently in the future; both need to seize this opportunity.
This paper looks at key points such as:
The pivotal role that culture has had to play. Traditional control mechanisms and oversight arrangements have been less efficient or unable to function due to large-scale remote working. A firm's culture can help plug the gaps and ensure that all governance and risk control arrangements follow the spirit of the intentions rather than worrying about ill-fitting prescriptive policy or process.
How strong corporate governance is often the glue that holds a firm together and tends to be placed under strain in times of crisis. In response to the pandemic, firms have identified benefits of adopting a more technology-based focus to their governance arrangements.
Recalibrating risk and rethinking the associated controls as risk management, compliance and internal audit functions are challenged by the ability to perform physical oversight in the office. As hybrid working arrangements form – split between working remotely and getting back into the office – firms need to think carefully about how best to continue to encourage good conduct from their employees and provide appropriate, support, oversight and challenge.
The evolving regulatory agenda as regulators revisit their requirements or expectations, and their broader supervisory approach and tools. Extensive use of guidance during the early stages of the pandemic allowed supervisors to be more agile and to give firms more latitude about how best to generate desired customer outcomes. The potential operational efficiency gains from being able to respond with agility and less prescription could become increasingly popular among supervisors.