Lessons from Past Crises Prepared Industry for Covid-19

By Dan Thieke, Managing Director for Business Risk and Resilience Management at DTCC

As the global impact of coronavirus (Covid-19) creates unprecedented challenges for companies across sectors, financial services has also been significantly impacted. While the top priority for firms continues to be the health and safety of their workforce and continuing to serve their clients, operational resilience is of increasing importance due to the ongoing and growing threat of disruption. 

When it comes to preparing for potential market crises, the financial services industry has the benefit of experience. From the 9/11 terrorist attacks, to the 2008 Lehman Brothers collapse, to Hurricane Sandy in 2012, the industry’s ability to navigate through difficult times has taught us three valuable lessons related to resilience that are being applied during the current pandemic.

1. Remote work is paramount. Those organisations that have prepared to provide robust remote working capabilities have excelled by seamlessly maintaining business operations despite the overwhelming majority of staff not being in the office. While it appears that most of the industry has now settled into working from home, the current environment demonstrated the importance of the industry’s virtual desktop infrastructures (VDI). However, firms will need to be extra vigilant to monitor and mitigate sources of operational risk by ensuring adequate systems, processes and controls are in place.

2. The fewer manual processes, the better. The industry has significantly increased automation, an evolution accelerated by past disruptive events and the ongoing need to reduce costs as advancements in technology progress. In the months ahead, firms may have an opportunity to further reduce or eliminate processes that require a physical presence in an office, driving even greater levels of efficiency and operational resilience. We can expect to see this trend continue in the years ahead as firms re-examine their business continuity strategies in light of the current pandemic.

3. We must consider our operational footprint Past incidents that have damaged physical sites, such as natural disasters and terrorist attacks, have forced the industry to consider its operational footprint. This has led to new resiliency measures, such as enhanced transfer of work abilities and improved operational and cybersecurity approaches. At the same time, as the industry becomes more interconnected and dependent on peers and vendors – extending each firm’s footprint and risk -- third-party risk assessments have also become more prevalent across the industry, providing firms with important insights during this crisis.

Past crises have enabled us to reflect and improve, putting the financial sector in a position to continue operating during today’s crisis. As the industry navigates this pandemic, the lessons we’ll learn will inform future conversations around resilience, with a likely focus on scale and interconnectivity.  There’s no doubt that firms will continue to replace manual processes with automation, where possible.

Discussions about resilience will also likely highlight the importance of sector coordination. Regulators, associations, market participants, providers and policy makers have been collaborating well throughout this crisis, resulting in a rapid roll-out of regulatory relief and ongoing dialogue on how to continue to best support firms. There is a strong desire to continue this communication, and with in-person meetings, conferences and events currently postponed or cancelled for the foreseeable future, we must continue to discuss how we can engage outside traditional face-to-face gatherings.

As the industry continues to adapt and evolve as a result of the impact of Covid-19, so too will efforts around operational resiliency. Firms must prioritise continued collaboration and communication with each other and with the regulatory bodies both to determine the optimal way to safeguard the resilience of critical business services and to ensure the stability of the global financial system.