How Pandemic Threats Can Impact Financial Institutions

The 2019 Novel Coronavirus (COVID-19) is affecting the forecasts of gross domestic products (GDPs), the risk of sovereign bonds, and the companies that rely on suppliers in impacted countries. Goldman Sachs has slashed GDP forecasts for many countries due to Coronavirus, some up to 80% with ramifications regionally and globally.    

The United States may face less risk, but what about call centers in the Philippines and India? What about your portfolio of Asian sovereign bonds?  And what about the supply chain disruptions affecting specific companies in your holdings? What third party business services will be affected?  Additionally, there are impacts across executive travel and employee safety. Pandemic risks can make financial systems think twice about operational risk and risk management.

As organizations scramble to understand the current threat and economic impact of the Coronavirus or future public health threats, we are all reminded how threats from infectious disease outbreaks are far different than other operational impacts: the scale and duration can be much larger.  

Pandemic threats require scenario coordination across business functions, supply chains, employee health, counterparties, investment credit and lending portfolios. Pandemic scenarios and outbreak response must be constantly updated and new scenarios added, forming new projections which prompt new mitigating actions. 

In the face of public health threats, from outbreaks to full-blown pandemics, the Financial Enterprise faces operational, financial, and employee protection risks. It’s a triple whammy. 

Recently, the Wall Street Journal wrote “Not since the Sept. 11, 2001 terrorist attacks have Wall Street banks faced a logistical challenge like the one potentially posed by a coronavirus outbreak in the United States. Sustained quarantines and widespread business closures would hit credit-card and corporate-lending businesses. Further interest-rate cuts, which the Federal Reserve may use to shore up the economy, would crimp profits.” 

And large firms are preparing. Morgan Stanley is preparing a backup trading site in suburban Westchester County. JPMorgan Chase has nixed all nonessential international trips. Bank of New York Mellon Corp. ran a drill temporarily shutting down its downtown Manhattan headquarters. And Citigroup extended its international travel ban for all employees.

Operational Resilience in the Face of Possible Pandemics

Maintaining operational resilience in the face of possible pandemics requires detailed analysis of the unfolding events along with complicated ‘nested’ scenarios, which can change on a daily, if not minute by minute basis. Regional, functional, and third-party linkages must be incorporated. There are different levels of risk for different functions in different regions.  Global services can be impacted from the weakest link. 

With pandemic threats, people, assets and infrastructure may become unavailable, all at the same time. And, the scenarios change fast.      

Yet, there is a cost to preparedness, tracking, and mitigating actions. Upgrading systems, investing employee time and resources in updating current plans, digital transformation, contracting with back-up suppliers, running drills, even buying more hand sanitizer for conference rooms, it all costs. 

Allocating too much or too little to protect the business, your employees and customers is a constant concern. Commitments to shareholders and investors, threats to reputational harm, and the effectiveness of the protections are all theoretical until the event happens.  

FFIEC Pandemic Planning Guidelines 

In 2008, the Federal Financial Institutions Examination Council (FFIEC) produced guidance for firms regarding their Pandemic plans.  They remind us that “Unlike natural disasters, technical disasters, malicious acts, or terrorist events, the impact of a pandemic is much more difficult to determine because of the anticipated difference in scale and duration. The nature of the global economy virtually ensures that the effects of a pandemic event will be widespread and threaten not just a limited geographical region or area, but potentially every continent.”  

Beyond the traditional Business Continuity plans, the FFIEC asks that firms: coordinate with outside parties, identify trigger events, put in place employee protection strategies, ensure capacity and systems are in place for remote work.  

Pandemic Response and Tracking Absenteeism 

Perhaps the most significant challenge from a severe pandemic event will be staffing shortages due to absenteeism. The Department of Health and Human Services states that in a severe pandemic   “absenteeism, attributable to illness, the need to care for ill family members and fear of infection may reach 40 percent during the peak weeks of a community outbreak.”

Most Financial Firms will have HR policies that prohibit managers from asking why paid time off is being taken.  This can make it difficult for managers and the firm to track absenteeism. For example questions such as: Is the employee sick, caring for a sick family member, and when would they return, may not be allowed due to internal compliance to HR policies.  

Creatively, our clients are using the Everbridge Critical Event Management (CEM) system to track absenteeism for critical personnel.  Using the polling capability of Everbridge the Business Continuity team can target the critical people who support the mission-critical functions of the firm.  Simple communications template allows the employee or contractor to respond affirmatively with their ability and location of work.   

Response collaboration for the enterprise and the lines of businesses  

Everbridge has worked with many financial institutions to help extend their risk response capabilities for all sorts of physical and environmental threats. For pandemic threats, Bank of Hawaii reported that during the ‘swine flu’ H1N1 outbreak in 2009 they used “Everbridge daily to keep executive management current on the international situation and to keep them apprised of the implementation of our pandemic plan.” – Raymond Trombley, Corporate Business Continuity Manager.

At that time, the bank ‘created a flu firewall for workers.’  “A chain of leadership has been developed for every bank department to cover for those who might be ill”, Trombley said. Among other planning steps, he said the bank has identified which of its 500 units are most critical to business operations and which must be recovered first, which operations will increase or decrease, need for alternate work sites for staff and increased telecommunications

Other important facets of their Pandemic plan include:

• Changes to absentee policies, sick leave and dependent care  
• Nurture a culture of cleanliness and awareness, placing sanitizing stations and encouraging people to wash their hands and cover their mouth and nose if they sneeze or cough.
• Designate coordination teams to carry out plans 
• Make sure subcontractors and suppliers have a plan

Start with Threat Analysis: 

What are the work stoppages, supply chain issues and regional response to the Coronavirus that impact your organization?  Get the details you need as part of the Everbridge Risk Intelligence Situation Report which tracks geopolitical, weather, man-made and natural disasters.

Coronavirus: stay informed on latest development and best practices. Use a new specialized coronavirus threat feed with CEM. learn more.