Emergency Preparedness – Key Considerations for Financial Institutions

Thoughtware Article Published: Mar 18, 2020
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Everyone is likely monitoring the evolving COVID-19 situation closely. While the safety of your families, workforce, customers and members will continue to be your top priority, it’s important to consider your emergency preparedness to help ensure you can meet your customers’ and members’ current and future needs.  

Below are some questions and topics that may help you prepare for the evolving situation and increase the likelihood you can continue to serve your customers, members and employees:

  • Have you developed a plan for sharing information and interacting with customers, members and employees?  
    • Is everyone at your institution delivering a consistent message?
    • Is the message designed to calm fears and address applicable concerns?
    • Are there lags in communication?
  • Your employees are affected just as much as your customers/members. How is employee morale? How are you helping employees deal with family care, increased stress levels, etc.?  
    • Have you implemented an employee assistance program? If so, should the current program be enhanced?
    • Do you have a counselor on call? If not, should one be retained?
    • Have you considered offering child care for employees? If you offer child care, what does this mean from a liability perspective?
  • Have you modified your marketing efforts? Should you change your radio, TV, social media or internet advertising?
  • How will you mitigate the risk of fraud, social engineering and phishing attempts? How will you educate your employees, customers and members about these attempts? 
  • With the added reliance on remote services and technology, e.g., remote and mobile deposit capture, online banking, VPN/remote access, etc., what’s the effect of service interruptions and/or slowdowns in services? 

Branch Considerations

  • Are you going to close branches or lobbies, change hours, etc.? What would cause branch or lobby closures, changes in hours, etc.? How and when would you alert customers and members, applicable regulatory bodies, employees, etc.? 
  • Are current staffing levels, cash-handling procedures, vault access, teller drawer limits, etc., still reasonable? If the situation continues to escalate, what actions will be taken and when?
  • Do you anticipate seeing additional cash withdrawals? Do you need to have additional cash on hand? Will large withdrawals affect your liquidity?
  • Have you taken reasonable safety measures, e.g., gloves, protective clothing, hand sanitizer, etc., to protect employees? 

Wire Transfers

  • If your wire department is centralized, should you consider relocating some employees to reduce the likelihood the entire department becomes sick?
    • If you relocate employees, what challenges will employees experience?
      • How will information be shared so wire transfer requests can be verified?
      • Will employees be able to log in from the new location?
    • Do you need to review wire transfer access levels in case multiple employees are out sick or caring for family members?
  • Do you need to change the control structure to facilitate the contingency plan or mitigate risk caused by enacting the contingency plan?

Lending Function

  • Should you offer any new loan products to assist businesses, e.g., restaurants, small businesses, etc., and consumers affected by COVID-19?
    • How will you underwrite the loan?
    • How will you close the loan?
    • Are the new products or services compliant with applicable laws and regulations?
  • How will you handle the increased demand on loan refinancing requests?
  • Should you proactively call customers and members to see how they will be affected by COVID-19?  
    • Loan modifications
    • Skip-a-pay or forbearance
    • Communication expectations
    • Discuss new loan products

Liquidity Management

We’re in the early stages and still learning about the effect of COVID-19. While liquidity may not be a current concern, it should be a major focus, and financial institutions should develop a plan. The plan you implement will be unique to you and depend on many factors, e.g., COVID-19’s level of effect on your staff and community, the support offered by the federal banks and government, etc.

  • At what point or level would the following need to happen before you have difficulty finding funding:
    • Loan and investment cash flows slow down or stop
    • Unadvanced lines of credit are accessed by customers
    • Loan demand increases as businesses and consumers need cash to support day-to-day existence
    • Deposit balances shrink as businesses and consumers use their cash to support daily expenses
    • Brokered deposits become less available as other institutions need those funds to support their balance sheet
  • Have you established a line and pledged collateral to support borrowing from the Federal Reserve Discount Window?
  • Should you borrow funds now to support your balance sheet in the future?

Board of Directors’ Considerations

  • Define the risk appetite of the institution
  • Define the institution’s role in helping customers and members navigate this event
  • Meet remotely and increase the frequency of meetings
  • Communicate meeting results with employees

There are a multitude of other concerns and issues, such as interest rate risk, enhanced cleaning, guidelines for proper hygiene, credit quality, etc., not addressed above. We are confident we will all navigate through this event. If you would like to discuss any of the above questions, topics or other issues facing your institution, reach out to your BKD Trusted Advisor or use the Contact Us form below. 

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