COVID-19: Adapting to a new way of working and impact on the regulatory timeline

We are facing incredibly challenging times as a result of the COVID-19 pandemic. At the beginning of the year, when we started learning of the outbreak and seeing the lock down of Wuhan, this would have undoubtedly prompted Boards across the globe to check their continuity plans to understand how a continued and global spread of the virus would impact their business models. Some acted faster than others, however it was not overly surprising to notice some firms scrambling at the last minute to check that their IT infrastructure was in place, whilst reviewing their operating frameworks to ensure that homeworking was scalable.

Whilst some may have been accustomed to remote working, this practice would have been alien to others and particularly those who never felt comfortable with working from home. It is also too easy to focus purely on the core BAU deliverables and forget the human side. Team managers will be looking for new ways to keep teams working effectively and maintain team bonds with an aim of addressing social challenges associated with prolonged lone working. Work may be the only significant social interaction for several people. How can we ensure that the social bonds in the workplace are not broken? It’s been great to see the use of platforms, such as Zoom and Teams, that allow “face to face” interaction (I believe there may have been a few drinks in there to boost morale as well!).

Given the breadth of teams involved in the investment and valuation process, home working will also put to test working relationships particularly where significant co-ordination is required. Fortunately, technology has helped through process automation but where tolerances are constantly breached, through continuous market turmoil, additional effort and diligence is required to ensure assets are managed appropriately and valued accurately. Overall, it has been encouraging to see firms invoking and successfully executing their contingency plans. There is no doubt this experience will place operational resilience at the very heart of what we do going forward.

Regulatory initiatives will likely be pushed out given market volatility and the unprecedented operational impact to firms. ESMA has already stated they are relaxing the implementation date of SFTR from Apr to Jul 2020 (applicable to counterparties initially) however it’s unclear whether dates specific to UCITS and AIFs (due in Oct 2020) or CSDR’s force settlement discipline rules (due in Sep 2020) will be pushed out. There is already momentum on the LIBOR transition with some investment managers already issuing new products referencing Risk Free Rates (RFRs), such as SONIA and SOFR. I believe this trend will persist to limit the effort in transitioning the back book at the end of 2021. Regardless, it’s reasonable to expect some form of announcement from regulators indicating revised implementation dates for such initiatives soon.

So let’s take a deep breath, and regain perspective on what we are doing, why we do it, and how we do it. Let’s embrace the technology available to us and keep communication as open as possible whilst focussing on ensuring client services are not compromised during these unprecedented times. Most importantly, stay safe!