By Hervé Mazenod, Managing Director of Financial Services, Gobeyond Partners

Across the globe in 2020, operational resilience in financial services has been subject to renewed regulatory scrutiny. In the UK, consultations have been conducted by the Prudential Regulation Authority and the Financial Conduct Authority, with an eye to further supervisory action across the sector in the near future. Just this month, the PRA announced that it will place greater emphasis on resilience to cyber threats in the insurance industry in 2021.

But supervisory action isn’t only on the horizon in the UK. The EU has also followed suit, with the European Commission recently proposing the Digital Operational Resilience Act – a piece of legislation that would not only mandate risk mitigation but increase regulatory harmonisation across EU member states. In Australia, the Council of Financial Regulators has issued a detailed mandatory framework to ensure that banks, insurers and superfunds strengthen their cybersecurity proactively rather than reactively. And the United States Federal Reserve has released Sound Practices to Strengthen Operational Resilience, an advisory document for financial services firms which recognises the importance of coordinated supervisory approaches across the globe.

The impact of COVID-19 on banking and finance

Of course, much of this global activity to strengthen financial operations has come around as a result of the COVID-19 pandemic. Although an existing item on the financial services agenda, the topic of operational resilience has been brought into sharp focus after many service providers found themselves testing their own resilience in a number of unexpected ways during the course of this year. The early weeks of the crisis, where service providers worked at pace to implement homeworking solutions and support their most vulnerable customers as multiple channels; particularly digital, placed a massive strain on operational capabilities.

From London to Frankfurt, Sydney to New York, firms were forced to adapt at pace with mixed success. In many ways, this was the mass ‘stress test’ many had been expecting – but in the end, few were as prepared as they might have hoped. As we look to make a success of the ‘new normal’, firms are looking to learn from their experiences in the first half of the year and ensure that they are more adaptable and resilient in the face of future shifts or crises.

For most financial services firms, the move towards stricter regulation in recent years has not come as a surprise. Given the sector’s recent experiences across markets, many firms would also agree that emphasising operational resilience is the correct prioritisation by regulators at this time.

A customer-centred future for financial services

However, operational resilience is not about box-checking compliance, and indeed there are opportunities for firms that take a broader, more pragmatic lens as we approach a new era of operational requirements. Beyond being an ancillary activity, resilience can and should become an integral part of the way we design, resource and deliver financial services with consistently strong customer experience. Firms now have the opportunity to build back into their ways of working: being more resilient, adaptable, effective, integrated, and customer focused.

Grasping these opportunities will require a perspective shift around how we approach resilience. Those who succeed will not view new regulations as another bit of red tape. Rather, they will take the spirit of the regulations and embrace them as a force for good: a catalyst for truly global, joined-up thinking.

A proactive approach to technology

With proactive leadership, deep analytics-based analysis of customer journeys can enable firms to better understand the flow of demand, while identifying where in the business there are resource or system risks, with particular focus on cybersecurity — cyberattacks are not constrained by international borders — as well as risks posed by the capability or capacity of third party suppliers. Similarly, robust scenario planning can also be used not only to model the impact of catastrophic events, but also to model how future-ready firms really are to face shifting customer demand, channel shift and disruptive entrants.

There is no doubt that, as we go into an uncertain winter, the ongoing pandemic will continue to cause operational strain across all sectors and industries, in all parts of the world. With regulation coming down the tracks in the coming years across jurisdictions, financial services may be tempted to wait for full international alignment until they tick the compliance box, but this would be a missed opportunity. By embracing global operational resilience as a key investment and intrinsic design component of financial services, firms can enhance and improve service now, while also safeguarding businesses and customers for the future.