In today’s COVID-19 crisis and corresponding instant recession, banking leaders have no choice but to navigate the next 18 months with a blend of strategy and business continuity.
The authors of this column come from two different worlds:
For the past 60 days, banks have pulled out their disaster recovery plans and used parts and pieces of them to navigate an unforeseen landscape. As we approach the gradual “Great Return,” banks have made it through the tense activities of the “stabilize” phase and now it’s time to situate and reflect on business priorities and pressing needs going forward.
This is not the time to rest easy and consider the job done. While banks have increased VPN connectivity, provisioned new laptops, expanded video conferencing licenses and realigned branches to appointment/drive-through models, the real leadership test is just beginning.
The phased lifting of lockdowns across the states will not mean a return to normal, but rather a real-time test and learn process to understand what the next normal will be. It’s time for bank executives to double down on their crisis focus, dig into data, and work to address the five key priorities that will separate the winners from the casualties in the next 18 months. CEOs need to assign an executive to each priority with what Navy Seal Jocko Willink calls “extreme ownership.”
Banks are facing a triple threat to revenue:
A cardinal rule of business continuity planning is that when the plan is activated in any manner, risk controls need to be doubled down. With entire banking teams working from home, the normal checks and balances of visibility have clearly been altered, and institutions need to double down on putting transparency in the process. An immediate step would be for the bank’s enterprise risk professionals to complete a review and issue findings of where normal visibility is not in place. Additionally, it’s time to get a payback on the institution’s recent investments in data warehouse and business intelligence resources. This team should be working overtime to create a top-notch credit risk analytics capability that will be ready when the walls rattle after loan payment deferrals end.
The drastic change in bank operations over the past few months has surely revealed operational inefficiencies, and they could be getting hairier every day. Because many operating changes could become permanent, it’s important that each business leader identifies key areas where manual processing, a lack of data integration or inconsistency in procedures are occurring. These operating deficiencies can be prioritized by the executive team based on impact, effort and risk, and then focused “sprints” should be executed on a continuous basis. Executives cannot assume these process changes will be made – they must create a visible tracking process at the top of the house.
Maintaining normal operations is challenging in these times; it’s even harder to maintain sales momentum. In competing against the too-big-to-fail crowd, local banks and credit unions will not find a better environment in which to gain market share. To be effective in gaining awareness and new customers, bankers need to maintain an unrelenting focus on their remote channel experience and the marketing and engagement that must be driven in non-traditional ways. The entire executive team should take a few minutes to review the digital account opening and loan processes, and to look at key moments of truth like card issuance, transaction disputes, requests for loan payments deferrals and general pleas for help. This daily, tenacious activity of removing friction points in the new operating model is a discipline that will certainly survive the COVID-19 crisis. Banks need to maintain “delinquent experience reports” the same way they track delinquent loan reports.
There will be no greater design challenge ahead than developing a workplace strategy that aligns with all that changes during the “Great Pause.” While all banks will follow safety guidelines and increased hygiene habits, the real challenges executives will face lie in adapting a culture that:
Right now, GonzoBankers have the opportunity to create a new vibrancy and resiliency in their organizations through hard work. As strategy innovator Kit Krugman concludes, “The decisions we make now will be encoded in our organizational psyche for the months and years that follow.”
One of the key things that both a banker and a CIO have learned over the years is that no plan survives the first day in its original form. This has been apparent every day for the last two months. Bank executives must buckle in, because no business continuity event goes on longer than a pandemic, and with time the odds increase exponentially that something is going to happen that no one saw coming. Now is the time for bank leadership groups to be standing ready to activate a SWAT team approach to the next thing that comes out of left field. There is no new normal until we establish it.
Stay safe, friends!
2 thoughts on “Five Priorities When Bank Strategy Meets Business Continuity”
As usual Gonzo provides great insight and actionables. I don’t see how we don’t go from historic low interest rates to historic high interest rates in record time, with the government printing money and planning to print more. Unless banks want to follow the S&L’s of the 80’s into oblivion, there needs to be a focus on hedging interest rate risk, raising interest rate caps on loans when they have them and modelling what seem like crazy rising interest rate scenarios. Call me “Chicken Little” if you want to but I paid attention in Econ 101.
Hi Bill. Sounds like we are comrades and wannabe economists. I certainly put myself in that category. Here at Cornerstone we have formed a kitchen cabinet and have noodled on these issues with the idea that a consensus from a number of us that focuses on these things is better than any one of us. What I would say we are seeing is that the fed and political climate has changed since the ’80s (which I remember well) to the point where they just won’t raise interest rates. So what we believe is going to happen is another dose of stimulus into the economy before the election and another post election. We will then have given out more money as a nation then we did in any previous situation, be it peace or wartime. We agree totally that this money will end next spring and then there will be a coming to reality moment across the economy. Having said that, we still don’t see them raising interest rates. Your opinion is as good as ours as to what will happen in that environment. At some point we have to get into business and bank failure to wash out the ones that can’t make it even with a stimulated economy. Loans will have to be paid back eventually both at a government and private level. We enjoy the dialogue!