Why workforce resilience is now a critical focus for bank CROs

As hybrid working becomes normalized, Chief Risk Officers (CROs) at banks are broadening their toolkits to take account of new threats.

In brief

• Maintaining workforce resilience will be a critical focus, post-COVID-19.
• Banks must reassess corporate culture, leadership styles and the entire employee life cycle under a sustained hybrid working approach.
• CROs are expanding their role to ensure their organizations can adapt and thrive.

Chief risk officers (CROs) are prioritizing workforce-related risks more than ever as the shockwaves from the events of 2020 continue to reverberate across the banking sector. With work-from-home (WFH) becoming a permanent part of the future in many firms, risk leaders are now facing a completely new set of talent-related challenges —posing both threats and opportunities.  Given the degree of disruption posed by the pandemic, building workforce resilience has never been more important.

Bank CROs are well-versed in helping their companies withstand, adapt and thrive in the face of competitive, regulatory and technical threats. But risks related to company culture, leadership styles and employee well-being have not been front of mind until recent years. Amid the COVID-19 pandemic, social movements and tensions, and the evolving climate crisis, these issues were thrust firmly to the top of the C-suite agenda. Indeed, over 90% (pdf) of respondents to the 11th annual EY/IIF (Institute of International Finance) global bank risk management survey said workforce resilience was a higher priority as a result of COVID-19.

How workforce resilience is evolving

Pre-pandemic, workforce resilience was primarily focused on employee safety in the context of business disruptions, such as severe weather events. But COVID-19 changed that and now, workforce resilience carries a much larger meaning. In addition to keeping their workers physically safe, firms are increasingly focused on keeping employees well as a whole, with growing levels of investment in wellness benefits – be they physical, financial or mental.

The rollout of company-wide WFH practices during the pandemic – previously reserved for a small fraction of workers that had earned that right – demonstrated how quickly the world could change. Almost overnight, firms transitioned to remote work at scale – placing unseen pressure on core technologies, business processes and, most of all, the workforce. Parents tried juggling work with no childcare, single workers endured periods of loneliness, and families were separated – many grieving the loss of loved ones. What became clear is that establishing a workforce that is resilient to these kinds of extreme personal stress has never been so important.

Today, CROs are concerned not only with hiring and retaining staff. They’re paying close attention to whether employees have the right skills, can adapt to ongoing and significant change, and have the physical, emotional and leadership support they need to be engaged and productive. The wider culture within the organization and the way that employees are led and developed by senior leadership are growing areas of focus for CROs – they know all too well the dangers of inconsistent corporate values across the organization.

Getting used to a new way of working

With vaccines reducing the need for lockdowns, hybrid work models – where employees mix WFH with coming into the office – are set to be the new approach to business. While some employees are eager to be back in the office, many want to continue working from home some or all of the time, or work more flexible hours. The EY Work Reimagined Study indicated that two-thirds of workers in the banking and capital markets sector are likely to quit their current roles if flexibility is not accommodated, with the majority of these workers seeking flexible start and finish times.

Risk leaders have several concerns about this shift. While data protection and supervisory risks of remote work are notable concerns, maintaining a firm’s culture, behavior and values is a top priority. Survey respondents were particularly concerned about an erosion of the corporate and employee community caused by reduced face-to-face interaction. Almost three-quarters said this was a worry if staff are inconsistently in the office. These findings are further reinforced in the EY Work Reimagined study, in which more than half of banking and capital markets companies said they were concerned by the notion of fairness and equity in a hybrid working model, which carry clear implications on workplace culture.

While WFH offers benefits, such as eliminating commutes and increasing family time, CROs are aware of the negative impacts it can have on individual employees. Maintaining connectivity and collaboration (57%) and combatting employee burnout/fatigue (55%) are the two areas they are most concerned about, according to the survey. The potential negative impact on innovation and the blurring of boundaries between home and work are also concerns.

In response, more than half of banking and capital markets firms are planning to invest in new tools that support virtual collaboration. There has also been a notable uptick in wellness programs across the sector, such as resilience training, counseling services, lifestyle and health coaching, meditation resources and fitness perks; these are all intended to address the risks of employee burnout.

Banks are considering other levers to manage workforce risk, such as conducting employee listening activities via routine surveys and managing performance based on outcomes rather than observation. 

Time to be more inclusive

As well as lockdown-enforced WFH, the last 18 months shined a harsh light on banks’ diversity, equity and inclusion (DEI) strategies. In many countries, ethnic minorities and women suffered disproportionately from COVID-19 – either by falling ill and/or by having to juggle work and childcare. Similarly, racial and gender inequality were showcased by numerous high-profile global events.

As a result, banks – like other companies – have looked at their diverse, equitable and inclusive (DEI) programs and policies and have been making (sometimes significant) enhancements.

Over half of bank CRO respondents (52%) said there was a risk that DEI strategies were not broad enough. They identified a need to go beyond ethnicity and gender to encompass groups, such as those that are neurodiverse or have a disability. See EY’s Neurodiversity activities.

Increasingly, risk leaders are aware that being and feeling included is a fundamental need of every employee and that an inability to provide this is a potential barrier to recruitment, retention, productivity and a good reputation.

Yet, while the benefits of fishing in a bigger talent pool and embracing new perspectives are clear, delivering what is required on an ongoing basis in a hybrid work environment remains challenging.

An intensifying war for talent

An unexpected outcome of COVID-19 – from an economic sense, and in relationship to the impact of hybrid working being done at scale across thousands of companies – is an intense war for talent. The skills CROs view as most important in the survey – cybersecurity, data analytics and climate change – are not only in demand in financial services, but are transferable across all industries. Other skills, such as those related to artificial intelligence and model risk management, continue to be scarce, as well. Every firm wants those truly agile employees – those that can deal with a stark new environment tomorrow and can switch from one area to another.

This has shined a light on the vulnerability of the industry to the war for talent – both in the short term (can banks attract and retain the talent they need to manage new risks as technological disruption continues?) and long term (can banks remain an employer of choice 10 years from now?).

Talent risks are one area that CROs will surely have to weigh in on, at some point – not just in their own risk organization, but organization-wide.

The CRO’s expanding brief

The good news is that risk leaders can play a huge role in how their organizations adapt moving forward and how they maintain a strong focus on workforce resilience and talent matters more generally. This means partnering with the human-resources leadership and other business leaders to build a workforce that is safe, healthy and adaptable in the face of adversity.

Some techniques for achieving these outcomes include:

• Investing in agile capabilities: The pandemic has taught us to expect the unexpected. The ability for workers to embrace change, pivot quickly and take on new challenges will be table stakes in future. To grow an agile workforce, create an environment of continuous learning where employees are routinely taking on stretch assignments, exposed to new capabilities via rotational experiences and subject to routine upskilling, so that they have the confidence and support that they need to thrive in a new and challenging environment.
• Managing workforce risk: Human capital remains one of a company’s most valuable asset and the risk of workers becoming unsafe, or unhealthy, or leaving at scale, poses a severe operational risk to executives. Establishing a framework of workforce risk indicators, and reporting and remediating these over time, has never been more important. Potential risk indicators include attrition, tenure and diversity levels; employee engagement, net promoter scores and brand health indices; and time-to-hire and productivity measures,
• Redefining leadership: A hybrid working model requires new leadership behavior – peering over an employee’s shoulder or walking down to the office to check that they are being productive is increasingly outdated. Managers will need training to equip them with the skills to assess performance, provide mentorship and motivate staff when they’re not in the office. This includes establishing a connection with workers, and particularly new hires, where an absence of in-person interaction is possible.  Some firms are reframing the role of leaders to lead with empathy and create an inclusive work environment.

CROs and their teams must retain the focus on risk culture and, in particular, anticipate how this is impacted in a hybrid work environment. Working with the lines of businesses, HR and compliance, CROs will need to consider how controls and employee surveillance have to adapt. Avenues for escalation may need to change – even if people are not in the office, they still need to be encouraged to raise issues when they arise.

Flexibility will be key to success. The rules of hybrid work are still being written, so there is an opportunity to consider new ways of doing things. However, companies that create policies that are too rigid, risk painting themselves into a corner, while those that introduce too many variables risk confusion and conflict. Getting this balance right will be a good way to gauge a CRO’s success.

COVID-19 showed that banks need to be prepared for extreme eventualities. Having a resilient workforce will ensure they are in a better position to withstand and thrive when the next shock arrives.