When the government effectively shut down the economy to stop the spread of the coronavirus, it posed a massive challenge not only to businesses in the financial sector but also to those who regulate them.
In a follow-up to a September roundtable in which senior representatives from leading regulatory bodies discussed how the pandemic was affecting their organisations, Civil Service World and Hitachi Solutions invited the likes of BEIS, Treasury, the Financial Reporting Council, and the Competitions and Markets Authority to share insights on how they’ve adjusted to the "new normal" in the second national lockdown, and the challenges they face in carrying out their regulatory duties.
“What we've seen over the last eight months has been nothing short of amazing," said Tim Kidd, Head of Public Sector at Hitachi Solutions. Kidd said he’s been positive about the public sector’s ability to transform and innovate in such a short time, but that he wants to learn more about how financial regulators are faring.
Miranda Craig, Director of Strategy & Change at the Financial Reporting Council, said the pandemic has essentially affected the watchdog in two ways. "One is the ways of working organisationally, which like everyone else we had to change overnight." Craig said adapting internally was a "shock to the system," and that some members of staff had a steep learning curve. “Even something so simple as putting one's hand up on a Teams call was an adjustment. We spent a great deal of time making sure people were getting training so that no one was at a disadvantage in a virtual working environment," she said.
The other way the council has been affected is through its regulatory activities. The FRC regulates auditors, accountants, and actuaries -- work that is usually done on site and in person. Craig said that not only has this impacted the way that audits are conducted in terms of activities like counting stock and looking at inventory, but that these meetings typically have a human element that can't be replicated in a virtual environment. "A lot of it is based on judgments, trust, and relationships with the people on site," Craig said. "When the auditor is working with the management at the entities that the auditor is looking at, they're eyeballing them and trying to understand whether they believe what they're saying. All of that was swept away."
The Serious Fraud Office, a specialist prosecuting authority that tackles large-scale economic crime and corruption, has faced similar operational hurdles. Sara Chouraqui, the SFO's divisional head who oversees 35-40% of the department's cases, said her organisation was not prepared for its staff to work from home. In the early days of lockdown the SFO established a contingency planning group to assess the effectiveness of its existing procedures and to adopt a slew of measures that were needed to mitigate the impact of the pandemic.
Technology was the biggest and most immediate obstacle. The SFO needed urgent capacity improvement to their network to ensure that case teams would keep working together. "We were not set up for this,” Chouraqui said. “But I'm pleased that we were able to rise up to the occasion fairly quickly and move to a situation where indeed everybody is working from home unless there's operational need," she said. In those instances, the SFO's office is open and Covid secure.
The greatest test for the SFO, just like the FRC, has been in shifting its external activities online. This was no small feat, since the core of the office's work revolves around interviews with suspects and witnesses. Under section 2 of the Criminal Justice Act, the SFO can also require people to provide information or documents relevant to these investigations. All this is now being conducted electronically, with interviews taking place over the phone and documents being provided solely in digital format. While Chouraqui said that certain types of operational activity cannot be done remotely, in these instances safety is prioritised above all else. "At the forefront of everyone's mind is the safety of the victims, witnesses, and suspects, as well as the SFO staff and other law enforcement counterparts," she said, adding that the SFO has set up a task force to conduct a whole-scale risk assessment of operational activities.
Not everyone has found the adjustment to be a challenge. Carly Nimmo, Head of Competition and FinTech at HM Treasury, said that in terms of virtual communication the pandemic has made normal what her department was going to do anyway. As for the sector she regulates, the full effects have yet to be seen. “We’re still watching,” Nimmo said. “The immediate impact has been an acceleration of digital adoption, which has been good for FinTech, but on the flip side we’re yet to understand what the impact has been on access to capital and those kinds of issues.”
Nimmo said the external trends will be clearer in the long-term, but in the meantime she’s hopeful about the sector’s growth and thinks it has likely fared well as so much of life has moved online in 2020.
“The UK has been an early adopter in terms of tech in financial services and I'm really interested to understand what kind of opportunities arise for increased innovation and partnerships between traditional firms and FinTechs," she said. "I think that's something that that will definitely be accelerated.”
"What is really exciting is that the organisations we’re speaking to are adapting to the new normal by using the technology they already have available,” said Microsoft’s Richard Fisher. “It’s great to see innovation in action and if you need any help going forward please don’t hesitate to utilise either Microsoft or Hitachi.”
For further information on how Hitachi Solutions could support your organisation please contact hsuk-enquiries@hitachisolutions.com, or visit https://www.hitachi-solutions.co.uk/industries/central-government/