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 second consideration for 2020 is the impact of COVID-19 as it relates to business continuity. As COVID-19 disrupts normal business operations, financial institutions are charged with implementing options to serve impacted customers while continuing to comply with regulatory obligations and providing critical products and services to customers.
Given this focus on continuing operations, banks and other financial institutions should consider relevant federal agency guidance, including the Federal Financial Institutions Examination Council (FFIEC) related to business continuity plans and pandemic planning (FFIEC Guidance) and other pronouncements from the FDIC, OCC, and the Federal Reserve. This critical planning could likely use some significant improvements in 2020 for many financial institutions, especially as cybersecurity risk has increased dramatically with much of the country working remotely. Failing to plan could mean planning to fail.
The FFIEC Guidance identifies actions that can be taken to minimize the potential negative effects of a pandemic and remind financial institutions that business continuity plans should consider pandemics and provide for: (1) a preventive program, (2) a documented strategy for the stages of a pandemic, (3) a comprehensive framework to ensure the continuance of critical operations, (4) a testing program, and (5) an oversight program. Such business continuity plans should be commensurate to the size and complexity of the bank and its activities.
The challenges for banks in maintaining business operations, especially with potential employee absenteeism, should not be understated. However, certain actions may be taken immediately regardless of the state of a bank’s business continuity plan. We are monitoring this crisis the same way our clients are, and we are standing by to assist our financial institution clients in every aspect of their response to COVID-19—from contingency planning to HR issues and from loan defaults to exploring subordinated debt and capital infusions.
1. Continue implementing actions identified and practiced under existing business continuity plans.
2. If your business continuity plan does not currently include pandemic planning, review the FFIEC Guidance and the FFIEC Business Continuity Management Handbook for suggested actions to take.
3. Preparation and early action are critical—reach out to your Howard & Howard attorney for assistance in tackling these challenges.
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/.