On 15 May 2020, the Investment Association hosted a webinar on the "new reality" of remote working during Covid-19, looking at the implications of remote working on investment managers’ ability to maintain business continuity.
The panel noted that firms’ risk profiles, particularly in terms of conduct risk, are changing significantly. In particular, the panel explained that there have been challenges relating to the oversight of employees, and the maintenance of effective control over staff and the conduct they exhibit. These challenges are due to a number of factors, including: employees’ increased personal pressures and reliance on remote connectivity; an increased use of personal devices, new technology and multiple channels of communication to interact with colleagues and clients; and the changing behaviours of clients, customers and investors as a result of their own working environments.
The panel explained that firms are now moving to a "business as usual" mind-set. However, as risks are changing, the effectiveness of systems and controls relating to the oversight of staff come into question. So, what should investment managers be considering? The panel identified the following areas.
- Culture. The panel explained that employee welfare and engagement is crucial for driving the right conduct outcomes. Firms should continue the cultural reach into employees’ homes by making them feel valued and connected to the firm, and should be reinforcing behaviours and conduct expectations. The panel expressed the view that, in the age of Covid-19, culture is the most powerful tool – when there is a lack of supervision, getting people to consider their conduct because they want to, not because they have to, is key.
- Regulatory expectations. The panel noted that FCA expectations largely remain the same. The panel explained that firms need to be: proactive in assessing and reassessing risk; assessing the cultural connection with remote teams to keep an eye on staff conduct; and assessing the oversight and visibility that management have on the evolving conduct risk profile. Firms should be evidencing how the risks are being considered in the context of business strategy and how a firm’s strategy might be changing in this period. This will show the regulator that the systems and controls already in place are working effectively.
- Monitoring and surveillance. The use of multiple channels and personal devices to communicate with others has resulted in automated surveillance being difficult to maintain, and there has been a significant backlog of investigations. The panel suggested that getting full value from automated surveillance tools should be a priority for firms because of the inherent risks in multiple channels and personal devices being used. Firms should also be looking to monitoring programmes to see how they can get effective data to feed into their assessment of the risks.
- Governance. The panel noted that governance protocols have been "clunky" since lockdown began as governance forums that were established for the previous working environment are no longer sufficient, and some firms have been slow to adapt to the changing risk issues. The panel suggested that firms need to be agile and go beyond the boundaries of their previous experiences by changing the way in which they think about the escalation of risk issues.
- Building audit trails. The current circumstances make it difficult for firms to put together audit trails of how people are operating and functioning across different channels and platforms. It was noted that existing technology can help build these trails, but firms need to ensure that any tools/devices/platforms that staff and clients use are secure, compliant with regulatory obligations and meet data privacy requirements.