Like most, if not all, of the financial institutions Rochdale Paragon partners with, we have been monitoring conditions, listening to evolving official guidance and having frequent discussions about what business looks like as organizations begin to open and start to serve their constituents, customers and members face-to-face. Whether that is through air travel, onsite client engagements, drive-throughs or teller stations, there is no doubt service delivery will change. As organizations begin to consider reversing some of the remote work arrangements that have become the norm, it is important to think through a range of considerations. Organizations likely will encounter a multitude of inquiries from employees and members/customers, as well as from boards, examiners and auditors, regarding discussions and plans to begin the transition back to “normal”.
As a follow-up to our prior communications on Approaching Coronavirus from a Business Risk Perspective and Approaching a Remote Workforce from a Business Risk Perspective, Rochdale Paragon offers the ideas in this document as a starting place as organizations conduct their discussions regarding when and how to “return to the office,” regardless of what that means to you. As we have indicated in past communications, from a risk management perspective, it is important to remain objective as potential implications are discussed to ensure decisions are based on a foundation of reality and not in response to unfounded claims. While our continuing response to this current situation cannot eliminate the spread of the virus or prevent future events like this from happening, ERM processes undoubtedly help ensure organizations are diligent in anticipating potential risks and are more proactive in developing a well thought out response. As highlighted by the NC State ERM Initiative in its recently released 2020 The State of Risk Oversight report, “while organizations that previously invested in developing robust enterprise-wide risk management processes are still experiencing significant impacts from this unfolding crisis, that previous preparation to manage risks at an enterprise-wide level has hopefully positioned their leadership teams to be in a more proactive risk management position relative to others who have little, if any, ERM process in place.”
Like Rochdale Paragon’s previous articles, the following risk assessment components are intended to provide some ideas and direction for organizations to consider as they discuss when and how to reopen. The list certainly is not exhaustive and undoubtedly differs dependent on geography, internal capabilities and membership needs, but hopefully provides at least a starting point. Also, note that this list is in addition to the risk considerations outlined in our previous communications. If your organization has any questions on the list below or ideas you are willing to share with others, please reach out to any of us at Rochdale Paragon.
CREDIT UNION CONSIDERATIONS
Compliance/Legal Risk
- Legal implications of employees being “forced” to come back to the office
- Legal risk from employees contracting the virus while at work
- Legal risk from members contracting the virus while at the credit union
- Inconsistent leave policies for employees (or family members) that might contract the virus
- Violations of local guidance regarding return to work dates and other guidelines (e.g., number of individuals inside an office, physical separation standards, adherence to hygiene rules)
- Lawsuits from failing to make appropriate accommodations for employees who return to work
- Legal implications as result of health requirements enacted by CU, such as required temperature checks that can be perceived as invasion of privacy.
- Legal implications as result of unintended consequences around treatment of individual or groups where inconsistencies could arise around disparate treatment
Credit Risk
- Potential for collections and lending employees to become sick
- Increasing lending to distressed borrowers increasing delinquencies and net charge-offs
Interest Rate Risk
- Higher balances of very low fixed rates on increasing amounts of loans increasing exposure to NII and NEV declines in a rising rate environment
Liquidity Risk
- High unemployment increasing borrowing and decreasing deposit balances
- First-payment defaults and modification requests decreasing incoming cash flow
Reputation Risk
- Negative social media posts regarding decisions related to returning to the office (it is too early and too late; too many invited back vs too few, etc.)
- Being seen as caring more about financial results than people
- Being seen as lacking technology and other tools to meet continued needs without opening back up
- Negative comments if employees or members believe that inadequate guidelines and materials are in place to offer adequate protection
- Negative perception around brand if members view new initiatives are predatory as organizations seek to resume operations
- Negative comments if the organization later needs to reclose select offices
- Poor communication to employees, members, and the community regarding policy and procedural changes
- Negative perception from opening branches in certain areas but leaving branches closed in others
- Negative perception from allowing some personnel to return but prohibiting others from returning
Strategic Risk
- Poor or inadequate communications to employees and members about the reopening plans
- Increased competition for members and staff based on return to work and office opening decisions (e.g., competitors offering more flexible remote work arrangements or members being drawn to competitors if they open sooner)
- Lack of objective criteria outlining intentions and guidelines around decisions to return or delay returning to an office setting
- Increased expense associated with virus prevention supplies, cleaning efforts and facilities adjustments to meet guidance requirements
- Potential for re-emergent of virus outbreak across workforce
- Opportunity to cement relationships through supportive lending and transactional services during time of need
- Opportunity to evolve to touchless or more efficient transactions providing increased scale and cost efficiencies as members and personnel get more comfortable with new ways to complete transactions
Transaction Risk
- Operational difficulties from turnover due to staff not wanting to return to the office
- Inability to provide adequate supplies (e.g., facemasks, sanitizer, gloves, etc.) for being in the office
- Increased errors or decreased productivity due to staff anxiety around returning to work
- Increased fraud due to new protocols and standards for which testing has not been completed
- Increased absenteeism as staff balance work, children at home, and other factors
- Increased robberies due to face masks and other virus prevention requirements
- Increasing expense accrual with large PTO balances during second half of year
- Increased regulatory risk as processes and program continue to evolve at a fast pace and may lack proper diligence and supporting documentation
- Vendor/supplier disruption and/or inability to serve or provide the necessary items or services to support the CU needs
Like the considerations outlined above, the items below are intended to provide considerations for which organizations should consider specific to their individual situation.
RESPONSE CONSIDERATIONS
Compliance Risk
- Review insurance and other legal implications surrounding contraction of virus by employees and members
- Understand and follow federal, state, and local guidelines regarding back to work guidelines
- Review OSHA (Guidance on Preparing Workplaces for COVID-19) and other personnel and HR requirements regarding pandemic response
- Develop policies regarding required quarantine, cleaning and other practices in cases where employees and their family members test positive for COVID-19
- Develop thorough internal and member-facing communications regarding guidelines, changes in policies, products, fees, and other policies
- Review branch collateral and signage to ensure its updated and appropriate given any recent changes
- Review and include CDC guidelines in any return to work policies
- Provide and maintain necessary materials, equipment, procedures and facilities to protect employees and members
- Review leave and other illness-related policies for compliance and adjustments necessary given new environment
Credit Risk
- Monitor metrics daily around loan modification requests, skip-payment loans, delinquencies, charge-off trends, changes in credit line usage, suspended foreclosures and repos, and other important factors
- Structure the collection and lending team workplans to stagger shifts, separate employees, use PPE, and take other precautions to prevent having a significant portion of the workforce sidelined with the virus
Interest Rate Risk
- Hold frequent ALCO meetings to discuss lending, investment, and liquidity strategies
Liquidity Risk
- Monitor trends in the balances of all key loan and deposit types
- Increase the frequency of normal liquidity monitoring analysis
Reputation Risk
- Offer the ability to work remotely and flexible work arrangements whenever possible, given the new norms around scheduling other life events (e.g., groceries, schools, haircuts, etc.)
- Use a phased opening approach based on employee, member and community needs
- Maintain a clear understanding of priorities that determine when and how to open offices (e.g., metro vs rural locations, drive-throughs vs branch lobbies, and high-volume vs low volume locations)
- Consider maintaining special hours to support senior and other high-risk members, as well as first responders
- Give employees ample notice so they can plan accordingly to come back to the office
- Be lenient with employees who are uncomfortable with returning to work
- Intensify cleaning and disinfection processes
- Encourage employees who feel ill to stay home
Strategic Risk
- Communicate a reasoned and objective plan around re-opening guidelines so constituents trust that the organization has given adequate consideration of all factors
- Consider testing and other mechanisms to screen personnel wellness before allowing them to return to work
- Gain Board and senior management acknowledgement that we likely will never completely return to previous work processes and that successful organizations will embrace and capitalize on new work process opportunities
- Accelerate digital transformations and technology to ensure your organization will be able to compete successfully in what will be a more virtual world going forward
- Consider reducing the organization’s real estate footprint where feasible
- Conduct a strategic and operational risk assessment on your plans and revised programs
- Identify new opportunities to secure existing employees and members and how to attract new
- Develop a business resumption strategy over different time horizons for cohesive planning and execution (30 days, 90 days, 6 months, and 1 year)
- Consider a ”Return to Work” Committee to strategically and operationally plan, manage and report on organizational efforts
- Limit non-essential travel (communicate travel policy changes)
- Provide employee training on safety techniques
- Limit use of common areas
- Minimize the amount of personnel participating in large in-person meetings
- Allow personnel to work remotely part time
Transaction Risk
- Label or denote high touch objects (e.g., door handles, handrails, branch countertops, etc.) to increase awareness of importance to minimize touch
- Provide enough supplies to disinfect shared office space and equipment
- Increased employee presence at the entryways and other protection to thwart increases in robberies
- Build multiple teams that work different shifts to avoid all personnel being affected by the virus
- Assigning high-risk staff to roles that can be completed remotely
- Maintain staff contingency plans should positive COVID-19 cases be identified among employees or family members
- Post communications in offices regarding social distancing reminders and hygiene guidelines
- Consider adding multiple levels of safeguards to protect employees and members, and minimize opportunities for infection (e.g., plexiglass barriers, touchless hand sanitizers, facemasks, no- touch trash cans, distancing reminders on the ground, etc.)
- Consider upgrades to ventilation systems to ensure effective air movement and filtration
- Conduct training prior to full opening to prepare for new protocols and make employees feel comfortable
- Identify and address technology needs to allow people to return to the office and meet new distancing guidelines (e.g., employee chat, additional equipment to avoid sharing, etc.)
- Reconfigure work arrangements to promote physical distancing
- Look for opportunities to accelerate automation where possible
- Identify and train staff on member rules of engagement and when and how to handle difficult situations where members or staff may feel uncomfortable
- Develop centralized process change capabilities to track new decisions and resulting operational changes to ensure they are managed effectively
Like the situation in transitioning to primarily remote working, the decisions around transitioning back to office environments should be carefully considered. It is important to engage your risk management team to ensure the right questions are being asked and information being used to make decisions is indeed accurate and reliable. Our continued hope is that this information will help position you and your organization for a safe and prosperous return to a more normalized working environment.
Please contact us for any questions or additional information. We look forward to hearing from you!