As the COVID-19 pandemic starts to ease in some countries, banks are reflecting on the impact of a global health crisis on their institutions. The 11th annual EY/IIF global bank risk management survey shows that many in the industry are pleasantly surprised at how well their organizations have coped. From implementing widespread remote working mandates for employees, to rigorous demands on technology systems previously untested in such extreme circumstances, banks have managed through a prolonged, live stress-test environment to continuously provide customers access to products and services.
Over the last 18 months, resilience across existing and new risk dimensions has become a defining characteristic of long-term success for banks globally. Financial and operational resilience were rigorously tested, but banks’ decade-long effort to build greater and higher quality capital and liquidity put banks in a strong position going into the pandemic. The need for greater technological resilience came about as a result of greatly accelerated moves to transform digitally, as did workforce resilience as banks focus more attention to employee well-being. At the same time, societal and environmental resilience elevated banks’ focus on the need to pay closer attention to diversity and equity in society, as well as the impact of climate change.
However, none of this happened by chance. Substantial investments by banks to make their core businesses more resilient helped many to withstand the worst effects of the pandemic and are driving the continuation of this approach.
It is vital that banks remain resilient. Aside from COVID-19, it is clear banks will have to contend with persistent and dynamic disruption and change not just today, but tomorrow and into the future. Indeed, we are in a period of ongoing disruption and change. One of the biggest risks on risk managers’ minds is climate change. The idea that it is a problem that belongs solely to high-carbon-omitting sectors is over. Instead, 49% of bank chief risk officers (CROs) recognize it as a top risk requiring their utmost attention. Overall, one of the biggest challenges that bank boards and risk teams face is how to manage such risk and help their customers to transition to a net-zero economy.
There are three distinct areas of note that will determine whether banks will succeed in grappling with significant events.