Our overview of the Top 10 Considerations for Financial Institutions in 2020 series noted that financial institutions will continue to face challenges in a number of corporate, compliance, and risk areas, especially in light of COVID-19 and a potentially slowing economy in 2020. Our final consideration is financial institution governance and culture.
Financial institutions have been reminded over the last few years that the “tone at the top” is critical in developing a culture of compliance within an organization. For example, FinCEN’s 2014 Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance is a very helpful resource with regard to promoting a culture of compliance in BSA/AML compliance, but can also be a resource on developing a sound “culture of compliance” more broadly. This focus on corporate governance and culture is less prescriptive than other areas of compliance, however, it is just one aspect of a financial institution’s culture that seems to be rapidly evolving in 2020
Flexibility with governance and culture allows financial institutions to develop practices and tools that are unique for their specific institution, their set of products and services, and their community. Considering the toll that COVID-19 has taken on human connection and communication, good governance and culture practices have evolved quickly. Board meetings are being held electronically, client and customer calls are taking place over Zoom, Teams, or similar platforms, and team building exercises have been limited to socially distanced outings or virtual happy hours. This period in history will be another inflection point in the evolution of the digital nature of bank operations and banking in general.
While we are at this inflection point, financial institutions should be reviewing how they provide products and services, how they share and protect information, how they stay compliant with laws and regulations, and how they provide outstanding customer service—all in a digital environment. Services like online banking or remote deposit capture don’t seem to be options anymore. These 21st century services were critical for financial institutions’ ability to serve customers while being required to close physical locations.
Boards of directors and management teams have also adapted to the electronic nature of meetings, presentations, and decision-making. While we will certainly get back to in-person board meetings and management team meetings, developing governance capabilities in a digital environment will only serve to increase flexibility in the future. The ability to communicate and make decisions quickly has been a critical component of responding to customers, service providers, and regulators during the pandemic.
Maintaining strong but flexible governance practices and adapting to the environment as it evolves will be critical for 2020—and beyond.
1. Consider what lessons your financial institution has learned from the forced electronic communication and decision-making. Are there opportunities to increase the efficiency and effectiveness of your communication?
2. Are there new governance practices that your financial institution might benefit from incorporating into the governance framework as the environment normalizes? Are there corporate housekeeping matters that need attention, such as updates to bylaws or other functional corporate documents?
3. How has the culture of your organization evolved? Has your management implemented new policies or procedures to keep employees connected and engaged? Have management’s expectations evolved in any way?
Howard & Howard has a dedicated team of financial services attorneys with deep experience handling complex transactional, regulatory, and litigation matters. Our attorneys regularly advise clients on M&A, strategic transactions, third-party engagement, enforcement matters, and regulatory compliance. For more information, or for questions related to this Financial Institutions Advisory, please contact the author(s), your Howard & Howard attorney, or visit us at https://howardandhoward.com/services/financial-banking/.