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London’s position as a pre-eminent centre for global financial services had been under threat even before Covid-19 struck, thanks to uncertainty over Brexit. In response, many have echoed the defiant call during the Blitz – ‘London can take it’. But with the global slowdown and the retreat from cities as a result of the pandemic, the importance of London reassessing and reasserting itself becomes even more important.
To this end, the City of London Corporation has published ‘London Recharged’, a paper that explores how businesses will trade and interact in the City in the future. Key to the vision is an increased drive for innovation within financial services, utilising such tools as the FCA’s sandbox initiative.
Risk management will be key to growth
Whilst the call to action to seek out new markets and build new products to serve them is laudable, innovation without control is not sustainable. For financial services firms, this means control of conduct and prudential risks. Unlike the recent experience of some firms in the Peer to Peer, E-money and Crypto sectors, their reach should not exceed their grasp. The City of London, promoting its expertise and ‘my word is my bond’ heritage to a global marketplace, cannot afford another 2008 crash or LIBOR scandal.
Senior managers must lead from the top
This balance of driving change and maintaining standards requires leadership, a commodity that has unfortunately been found to be in short supply during the Covid-19 crisis. As Warren Buffet said, ‘Only when the tide goes out do you discover who’s been swimming naked’. In 2020 there are a lot of Emperors (of various business functions) who have been found to be without clothes.
Too many managers have the skillsets of custodians, not coaches. This may have been adequate when staff spent their 9-5 corralled in their cubicles, but it is not going to deliver the required results in a world of distributed workforces and infrequent face-to-face contact.
Across financial services, firms should be thinking about the calibre of staff and the extent of the control frameworks they will need to deliver the results, compliantly. And this assessment should start at the top of the organisation, with the senior management.
As we move towards 2021, senior management should be reassessing business plans and the risk landscape in light of the new normal. It is the responsibility of these SMFs to react to the changing circumstances, apply the course corrections required, and reinforce a positive culture throughout the organisation.
Culture is the foundation of a wider control framework
Culture is what happens in organisations when senior management and Compliance are not in the room. And there are many, many home-offices, kitchens and sitting rooms across the country where regulated activity is taking place. Staff need to know that standards still apply, whether they are in the office, a business continuity site or with their laptop on their knee, at home.
Culture is the foundation, but it supports the wider control framework built upon it. Firms need to ensure they can operate these controls effectively in the new fragmented work environments. They must be able to conduct remote 2nd Line and 3rd Line monitoring and assurance activity, and the day-to-day 1st Line oversight to control issues such as market abuse and miss-selling.
London can thrive and prosper in the new normal to come. But the development of sustainable business models will require a step change in leadership and vision.