On 2 March 2021, the Monetary Authority of Singapore (“MAS”) and The Association of Banks in Singapore (“ABS”) jointly published a paper addressing the effects of the COVID-19 pandemic on businesses and the impacts of implementing remote working measures (the “Remote Working Paper”). Though many countries have begun to implement vaccination programs, the MAS and ABS opined that it is important for businesses to anticipate hybrid working arrangements for the foreseeable future. Many financial institutions (“FIs”) have even announced long-term hybrid and remote working arrangements for their employees. With remote working arrangements come new risks (“Remote Working Risks”) and the need for new policies. The purpose of the Remote Working Paper is to “raise awareness of key remote working risks in the financial sector, share good practices adopted by FIs to mitigate key remote working risks, and strongly encourage all FIs to adopt good practices on risk mitigation”.

RISKS TO FIS’ OPERATIONS

The MAS and ABS listed three examples of indirect risks FIs may face as a result of working remotely, including those that may result from “poorly managed direct risks.”

Examples include:

• Reputational Risk: Major processing errors and/or the loss of customer information when working remotely can increase reputational risks for the FI and the entire financial sector
• Credit Risk: FIs may have to adjust validation processes necessary for credit assessment and monitoring purposes under remote working conditions. Without the ability to perform routine in- person tasks, such as conducting site visits to ascertain the existence of pledged collateral, it may be more difficult for FIs to notice red flags.
• Market Risk: This includes the possibility of employees being unable to interact with one another or third parties as a result of poor internet connection or virtual private network capacities. This could negatively impact dealers and risk managers’ ability to react swiftly to market volatility and sudden market movements.

RISK MANAGEMENT ACTIONS

To manage Remote Working Risks, the MAS and ABS encouraged FIs to consider the following:

1. Changes in the control environment: Remote work changes the control FIs should adopt management procedures that deal with the shift from in-person to remote work.
2. Outsourcing and other third-party arrangements: FIs should consider monitoring third parties’ risk management for their remote work as FIs should work with third parties to implement new safeguards and procedures to ensure outsourced services can continue smoothly.
3. Business continuity management: As FIs transition their large workforces to remote and other hybrid work arrangements, they should implement business continuity strategies that allow for smooth transitions.
4. Information governance: Information loss is a risk when activities are performed remotely. FIs should implement preventative and detective measures to mitigate this.
5. Cybersecurity: FIs’ staff’s remote technology such as computers, phones, and other personal devices should be secure.
6. Information technology assets management: Ensure employees and other third parties receive the necessary hardware and software to facilitate remote working.
7. Fraud: Implement fraud-preventative and detective technologies from remote working In the event in-person meetings, site visits, and other verification methods are necessary FIs should ensure there are guidelines in place.
8. Staff misconduct: FIs should implement new incentive and consequence management frameworks to encourage proper work etiquette from staff and ensure that this is communicated clearly to employees.
9. Legal and regulatory: FIs should take into consideration any legal and regulatory guidelines when implementing remote working practices.
10. Impact of remote working on people and culture: Even when working remotely, FIs should check in on employees’ morale and welfare and provide resources to encourage the development of strong corporate culture.

THE IMPACT OF REMOTE WORKING ON PEOPLE AND CULTURE

With remote working, team-building exercises and activities promoted within FIs to develop strong corporate cultures will now be different. The MAS and ABS listed four common cultural challenges FIs face now that working arrangements are remote:

• It is more difficult for employees to role model desired ethical behavior and the corporations’ code of conduct.
• It is more difficult for employees to maintain close bonds, which could threaten employee loyalty to the corporation.
• It is more difficult to integrate new employees during remote working arrangements. The lack of camaraderie could lead to new members feeling disengaged.
• It is more difficult for teams within an FI to participate in spontaneous collaboration. This could hinder creativity and innovation.

THE MITIGATION OF POTENTIAL LOSS OF COMPANY CULTURE

Some mitigation controls the MAS and ABS suggested to reduce the dilution of FIs’ company cultures include:

• Leadership: Senior management should reinforce the company’s culture and core values through virtual meetings with employees and emails.
• Connections: Managers should be encouraged to make an effort with staff through team meetings and social activities within and between teams. Reorganisation of teams occasionally can allow employees to interact amongst different staff.
• Community: FIs should make an effort to incorporate activities that benefit the surrounding community. This can include volunteering and fundraising efforts that unite the staff through a joint social purpose.
• Induction: FIs should make an effort to induct new members through sessions with senior leaders and a training cohort. Frequent catchups with managers and the team would be desirable.

CONCLUSION

Corporations across the world have had to adapt swiftly in response to the global pandemic. The swift and unexpected transition to remote work has opened the door for new, unexpected risks. The suggestions raised by the MAS and ABS acts as a guidance for FIs to consider when mitigating the risks associated with remote working arrangements. Various functions such as technology, human resources, board of directors, senior management, legal & compliance would have to work together to revise internal controls within the entity. The measures and controls suggested by the MAS and ABS should be customized to suit the FI’s business model, operations and size.

About the Authors

Holland & Marie is a compliance, C-Suite and legal solutions firm based in Singapore. We have extensive experience resolving typical compliance issues including regulatory inspections, satisfying regulatory requirements and maintaining best practices in corporate governance to navigate the rapidly changing regulatory landscape.

For further information, contact:

Chris Holland: Partner | Holland & Marie | 201802481R
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Disclaimer: The material in this post represents general information only and should not be relied upon as legal advice. Holland & Marie Pte. Ltd. may not act as an advocate or solicitor for purposes of the Singapore Legal Profession Act. The firm is not a law firm.