From the shockwaves of financial crises and pandemic events to the unpredictability of cyberattacks, banks and building societies need to be prepared for those rare, unforeseen occurrences that have the potential to disrupt operations significantly.
Thankfully, the experiences gained from such challenges provide us all with crucial insights into strengthening resilience against future significant events.
Understanding Significant Events in Banking
What we're calling "significant events" are those that are unpredictable and can have widespread implications for the financial industry. The global financial crisis of 2008 and the sudden onset of the COVID-19 pandemic are prime examples of how these events can significantly impact the banking sector, highlighting the need for preparedness.
Let's look at a few of these potential events and how we might mitigate their impact.
Pandemic Events
What are they? Pandemic events are widespread outbreaks of disease that affect people across a large region, typically spanning multiple countries or continents.
The COVID-19 pandemic that hit in 2020 caused major disruption throughout the financial world and no-one was left unaffected (us included).
With employees forced to work from home (or not at all), most banks and building societies had to adapt quickly to maintain the services and funding that customers expect.
Here's what we did at Newcastle Strategic Solutions:
We implemented a number of new technical solutions and process changes to move to digital and remote working. Due to the complex and sensitive nature of the financial sector, this required an extremely high degree of internal governance, so we could make changes rapidly whilst staying compliant with the necessarily stringent regulatory requirements imposed on our services.
A dedicated COVID task force and executive committee quickly identified key areas of focus for an effective response: wholescale transformation to enable remote working; adjusting ways of working to ensure operational effectiveness; supporting colleagues to protect their wellbeing; and collaborating effectively with the wider business.
We also kept in touch with our clients daily to make sure they were fully up to date with any changes, while keeping absolute focus on ensuring that whatever we implemented did not affect our control environment.
By doing this, our clients had the peace of mind that we could continue to deliver a high quality service and support their customers through a difficult time, allowing them to focus on other areas of their business.
Financial Crises
What are they? Financial crises are situations where the value of assets drop significantly and banks and financial institutions face liquidity shortages, often leading to economic downturns and widespread financial instability.
When they happen, banks must focus on enhancing their liquidity management and capital adequacy.
This involves maintaining a healthy ratio of liquid assets to ensure they can meet short-term obligations and withstand periods of financial stress.
A further step to take would be to perform regular stress testing to assess the bank's resilience to any potential crisis scenarios. Building robust risk management frameworks that can detect early warning signs of financial distress is also crucial.
This will improve a bank's potential to implement corrective measures proactively, such as adjusting credit policies or asset allocations, to safeguard against potential losses.
Finally, ensure you have a framework to launch new rates quickly and have a call centre / IT system that can accept increased capacities, as this will all benefit the overall liquidity position through turbulent times.
Sudden Regulatory Changes
What are they? Sudden regulatory changes in banking refer to unexpected alterations in laws or rules governing financial institutions, which can impact your operations, compliance obligations, and market dynamics.
The banking sector is highly regulated, and sudden changes in regulatory requirements can pose significant challenges. To stay in compliance, savings providers must be proactive.
This involves maintaining an open line of communication with regulatory bodies such as the FCA' investing in regulatory technology solutions, and training staff to understand and comply with new regulations efficiently.
Implementing an agile compliance framework can also help banks adapt quickly to new regulatory landscapes. Such a framework should include a mechanism for regularly reviewing and updating internal policies and procedures to ensure ongoing compliance.
Additionally, banks should participate in industry associations and forums to influence policy-making and gain insights into emerging regulatory trends.
The Ongoing Threat of Cyber Attacks
What are they? Cyber attacks are deliberate attempts to breach, damage, or disrupt digital systems, steal, alter, or destroy data, or control computer networks, often carried out by individuals or groups using various methods and technologies.
Cybersecurity threats are a constant concern for the banking industry, with the potential to compromise sensitive financial data and disrupt banking operations.
A strategy that includes regular security assessments, the deployment of advanced cybersecurity technologies (such as encryption, firewalls, and intrusion detection systems), and continuous monitoring of IT systems for potential threats will help keep threats at bay and your customer's money safe.
Making sure to keep employees fully up to date on cybersecurity best practices, and conducting regular phishing exercises can also help reduce the risk of data breaches caused by human error. For example, at Newcastle Strategic Solutions we complete mandatory training on an annual basis for all colleagues on cyber security.
Furthermore, establishing a rapid response plan for cyber incidents will enable savings providers to respond effectively to security breaches, minimising their impact on operations and customer trust.
A Good Problem - Reaching The Top
Suddenly finding yourself at the top of the savings rates charts is a great thing - it's where you want to be - but it can catch banks and building societies out if you're not prepared for the influx of new customers.
For example, a sudden strain on legacy systems can negatively affect the public opinion of the bank and create lengthy onboarding times and administration headaches.
In addition to that, if there’s not enough capacity for the likely increase in call centre activity, this problem compounds. Recruitment is one solution for this, but recruitment into call centres can take a while, so it’s not often a quick fix.
There are tools available to support your operations to be as agile and efficient as possible, such as the Work Force Management Tool utilised by Newcastle Strategic Solutions. The tool helps us to get the right people, in the right place, at the right time, ensuring a consistently positive experience for our client's customers.
An Effective Solution
While each of the crises above come with their own unique problems, a few issues many banks face will compound the negative effects of them all - strain on legacy systems, dealing with regulators, and a lack of both call centre and workforce capacity.
The good news is that all of these problems have quick and effective solutions.
Newcastle Strategic Solutions can provide a modern, industry-leading, fully white labelled savings management service that is constantly updated to ensure resilience against influxes and the kinds of events we've talked about today.
And our call centres work on a shared service, which means when your needs are greater, we can be flexible to accommodate the capacity, and ensure your customers continue to receive a high quality service.
Finally, when it comes to dealing with regulatory impact, we’ve got all the bases covered. Firstly, we’re always in contact with the regulator to understand any specific nuances, and we communicate those with our clients to let them know our goals, key milestones and our target completion prior to the deadline.
And, finally, as a subsidiary of a regulated entity we are constantly scanning the horizon with our elevated view of the regulatory landscape - we always have a view on what's coming and can prepare accordingly.
Contact us today to discuss your requirements and how we can help.
