The Covid-19 pandemic has put a significant strain on those responsible for managing risk and ensuring regulatory compliance at banks. Processes, controls, and surveillance systems that were designed for employees in controlled office spaces, using corporate systems, or working at restricted trading desks are almost certainly compromised – or rendered ineffective.
Meanwhile, regulators in markets all over the globe have relaxed certain rules to give banks more flexibility to respond quickly to the economic downturn. As a result, managers responsible for protecting the bank against risk events find themselves in uncharted territory.
While these risk managers are working hard to maintain effective oversight. Another group is at an even greater disadvantage. These are the appointed monitors that are responsible for overseeing regulator-mandated changes.
A recent WSJ article describes the challenges these external change agents face. Implementing new compliance systems goes far beyond setting new processes and policies. It requires personal interaction with the employees that manage those processes so the monitor can understand how business actually gets done.
The article highlights everything from structural cues, such as where compliance staff is located relative to operational staff, as well as behavioral factors such as how people interact with compliance team members.
This becomes infinitely more difficult when the subject employees are no longer in their ‘natural’ environment. While social distancing policies continue, this creates a significant blind spot that may ultimately prevent these monitors from implementing the critical changes they were assigned.