Women in Financial Services Blog

E2W member Lovedip Dhaliwal - ‘Why firms need to focus on operational risk in the virtual environment’

E2W member Lovedip Dhaliwal - ‘Why firms need to focus on operational risk in the virtual environment’

Katie.Dix / 26 Aug 2020

E2W member Lovedip Dhaliwal is an experienced Business Manager in Financial Services, helping front office business areas to drive forward new initiatives, reduce costs and manage risk.  She is a qualified Chartered Management Accountant with an MBA specialising in General and Strategic Management. Lovedip is passionate about championing diversity in financial services and is an active participant of E2W.  

Has operational risk become more prevalent in a virtual environment?

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.

Remote working has been hailed a resounding success for the financial services sector, helping firms to service their clients seamlessly without any disruption from the coronavirus pandemic.  However, in the rush to enable this, some of the usual checks and balances may have been sacrificed in the process.  Virtual work environments have contributed to heightened operational risk concerns. 

A remote workforce raises questions around conduct and compliance.  In the absence of direct supervision, employees may find they are forced into making decisions they would not normally make by themselves, increasing the possibility of things going wrong.  Managers are not as easily accessible for a quick sense check, and employees may feel pressurised to make those decisions quickly and without consultation.

Working from the kitchen table, or with other family members in the home, without a dedicated office space is not ideal.  Constant interruptions could lead to poor concentration and a lack of attention to detail raising the possibility of more errors occurring or taking shortcuts.  The physical separation from colleagues also makes it harder for people to alert managers of potential issues and conversely, may encourage them to cover up mistakes.

As the economic consequences of Covid-19 hit, some companies may be thinking about restructuring their business.  Staff reductions and the threat of redundancy could affect morale and contribute to increased security threats due to a lack of care from employees.

Many firms accelerated the rollout of cloud computing and digital technologies in order to be available for customers remotely and 24/7.  This potentially meant short cuts in the implementation of software solutions without the appropriate due diligence.

Furthermore, employees working from home may be greater targets for social engineering, increasing the risk of phishing, malware attacks and data security breaches.

Has the virtual work environment contributed to heightened operational risk concerns?

Undoubtedly, yes. 

It is important that in times like these, that organisations show strong leadership and reinforce the values of the organisation such as integrity, social responsibility and care for their employees’ wellbeing.  Staff need to feel that their safety and security is a top priority for the company they work for.

Managers may consider having regular engagement with employees on a one to one basis as well as in a team setting.  This will ensure that individuals still feel part of the group, albeit virtually, and encourage them to raise issues and speak up.  This is also a good opportunity to review their use of communication channels (such as email, video conferencing, instant messaging) and ensure employees are aware of the latest policies and escalation procedures.

Risk managers should perform risk assessments for newly adopted technologies and review remote access security and data protection controls.  They should ensure employees are up to date on the latest cyber security threats such as phishing techniques and scams, and how to report incidents securely.

Organisations may also wish to consider where they have outsourced processes to ensure that they have backups which are reliably available, to maintain operational resilience in the event that the outsourced country goes into lockdown.

The last word

The success of remote working has been surprising for many, particularly in the front office functions of banks and may even become permanent for some.  It has become quite evident that this latest development highlights the need for firms to focus on what additional operational risks this poses and how they should be managed.

About the author

Lovedip Dhaliwal is a business manager in the financial services industry.

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