Operational Risks – Two weeks in: What Canadian firms are doing during COVID-19

With the first quarter of 2020 coming to a close, there is a growing and almost universal sentiment that we would all like a redo on the year. As they say, hindsight is 20-20 (no pun intended) but it would have been nice to have had better foresight into how best to deal with the operational issues and risks that firms are facing right now.

Many, if not all, financial institutions (FIs) have enacted a variety of measures to minimize the spread of the COVID-19 virus and the Canadian FIs are all working diligently and in concert with other global banks to formulate and implement strategies to mitigate the spread of COVID-19, while still maintaining sales and trading activity and all associated operational procedures.

​So what exactly are firms doing? 

1. Keeping a Distance: This is a multi-faceted strategy whereby critical staff, including Sales and Trading staff, are working from home and/or dispersed across multiple locations, including business continuity planning (BCP) sites. Consideration is being given to a host of issues that arise from having staff work in multiple locations, including trading floor supervision requirements, specialized workstations (both hardware and software), tax implications, etc.  Those that are required to stay in the office are seated further apart from each other and workstations are being regularly and thoroughly cleaned.
   
   
2. Remote Access: Whether by Citrix, VPN or other technology, FIs are facing tough challenges with provisioning and scaling their remote access networks. Firms are employing tactics such as network expansions, creating tiered networks for critical vs. other staff, shifting non-critical staff to off-peak hours, etc. – all to balance the load on the network, and to protect critical and time-sensitive operational concerns, especially around market open and close, standard end-of-day procedures and upcoming monthly and quarterly financial reporting.
   
   
3. Regulatory Supervision & Surveillance: Trade floor supervision becomes much harder for a small team of supervisors when the sales and trading staff are geographically dispersed among multiple onsite and offsite locations, so firms have had to take defensive action against being offside of their basic regulatory requirements. Many have begun to look at rolling out soft phones with recording capabilities or phone recording in the cloud through specialized vendors, but these require commercial contracts that take months to negotiate, and time to procure equipment and implement. A few firms are reverting to manual processes of minuting phone calls that are sent to the client as well as supervision & governance teams. In addition to these measures, some have chosen to defer or delay internal audit reviews. Most importantly, however, a number of firms have increased the amount of communication they have with their regulators to keep them abreast of their plans, strategies, activities, liquidity, etc. and are requesting relief where needed.
   
   
4. More Business Continuity Planning: Firms are wisely already taking lessons learned from this crisis –  even as it still emerges – to better plan the steps necessary to prevent and/or deal with a future crisis or threat of a similar nature.

 
What is your firm doing or planning?  Send us your comments and challenges so we can continually enhance our program activities to meet the needs of the RegTech community.
 
Author:  Loren Schwartz, Strategic Advisor to the Canadian RegTech Association