The impact of COVID-19 lockdown measures on firms’ existing governance arrangements and controls cannot be underestimated. There is unlikely to have been a stress scenario planned – or even envisaged – close to the upheaval caused by the pandemic. Overall, firms and regulators alike have fared reasonably well, in response to the immediate impact.
However, governance arrangements and controls need to be reinforced and enhanced, and the pandemic has given firms and regulators an insight into how things could be done differently in the future, recognising that further, potentially more impactful, challenges may still arise. Both need to seize the opportunity being presented to them.
The key realisation and reassurance for firms has been the pivotal role that culture has had to play in how well they have fared in the transition from immediate response, through recovery and into the new reality. Regulators are increasingly making the link between a firm’s culture and good customer outcomes. 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 to ensure that all lines of defence and governance arrangements follow the spirit of their intentions rather than the prescriptive letter of a policy or process, generating good outcomes and minimising reputational risk.
As some employees venture back into the office, a hybrid model of remote and office working is likely to be in place for a sustained period and could become a permanent feature. Firms will need to adapt existing controls so they can operate effectively and efficiently, including re-evaluating whether the risk acceptance agreed around immediate remote working procedures and controls remains appropriate. Firms with an existing culture of customercentricity and employee empowerment will find it easier to maintain this remote way of working but will need to re-assess support for and monitoring of new recruits. Firms that are not used to adopting such a devolved approach may face a more significant challenge in trying to determine, cascade and embed the desired culture.
The need for change is not limited to firms – regulators will need to adapt too. Regulators have responded well to the COVID-19 challenges, demonstrating both agility and pragmatism. Firms may expect this to be the new operating norm.