The toll COVID-19 has taken on the economies of the world is, according to some experts, rivalled only by the Great Depression of the late 1920s and 30s. The ongoing economic damage, in addition to the health and societal issues present caused by COVID-19 is unprecedented, and experts are not sure we truly understand the extent to which damage has percolated.
According to Marcus Debaise, the clearest example the impact of COVID-19 has had on the economy is the massive scale of stimulus packages released by central banks in recent times. There has also been a record high of low interest rates in markets coupled with government stimulus packages around the world.
The leaders of the financial services sector across the world are focusing on six challenges when formulating their response to COVID-19. Most experts believe that full economic recovery will take a long time.
The focus should be on employees, says Marcus Debaise
How you treat employees holds a lot of importance as their health, wellbeing, and benefit packages have a massive impact on productivity. Due to the uncertainty caused by the infectious nature of COVID-19, you should encourage your employees to work from home and enforce containment measures wherever possible. This will allow your employees to remain healthy, and thus, productive.
In countries severely affected by the pandemic, customers are struggling to consume products as their revenue pathways are disturbed. Against this backdrop, the role of financial institutions becomes more important than ever. It is imperative that financial institutions adapt to their customers’ modern needs; such as providing liquidity and arranging for forbearance. It is equally important that they reassure customers of the institutions’ commitment to remain in business. Customers must be confident in how their financial service providers deal with issues related directly to the pandemic – investment portfolio performance, health, and travel insurance, and online payment facilities. For institutional customers and organizations, they must ensure effective digital delivery of services as the organizations deal with office closures, staff shortages, and other public health protection measures.
Third-party dependency and supplier relationships
Financial services companies and their customers have considerable third-party networks comprising of vendors (agents), technology providers, outsourcing partners, etc. They must carefully monitor and assess these third parties for information security, risks to other domains, and business continuity. This is especially important during this pandemic as companies must review these suppliers to determine which are most likely to be impacted and identify the ones that are critical to current business operations.
Communications and transparency
As the economic and business impacts of COVID-19 come to light, it is crucial for financial services companies to effectively communicate with customers, employees, regulators, and shareholders to maintain positive relationships. Financial services companies must regularly assess their digital communication capabilities and leverage it to communicate with customers and the broader marketplace.
Financial services companies need to assess the resiliency of their liquidity resources and available capital. To offset a larger, systemic liquidity crunch, central banks can entertain the idea of delivering enormous stimulus packages, which can help to bring down the borrowing costs. However, there is a risk of companies hoarding cash and open credit lines to keep their business going at the time of crisis. This is a practice to avoid as it can cause your customers to lose trust in your practices.
Planning for the future in times of uncertainty should include contingency plans. An example of how to create contingency plans is through the presentation of findings of scenario modeling to customers and acting according to the most likely outcome.