The novel coronavirus (COVID-19) has thrown up serious challenges for businesses all over the world. The words pivot, change and uncertainty have had a work-out in the media, and struggling companies are relying on a stable financial system to underpin their economic recovery.
The COVID-19 pandemic has put enormous pressure on the global economy. Across South-East Asia and India, it has been no different. Financial institution boards have been working overtime to provide liquidity in the face of loan book pressures and respond to rapid changes in consumer banking behaviour.
As a result, boards are meeting more often and making strategic decisions under pressure, making oversight more critical than ever. The good news is that by making smart decisions now, financial institutions can position themselves for prosperity and success in the post-pandemic world.
All eyes on corporate governance
Financial services boards of directors face a unique and complex set of governance issues. Banks are the guardians of public money, and they are bound by strict regulatory frameworks to protect depositors’ capital. Keeping banks stable is a high stakes game. Healthy banks mean a healthy economy and boards are trying to prevent a liquidity squeeze in Asian economies, many of which are already on government life support.
Bank governors find themselves in the thick of the challenge. They carry a legal responsibility to ensure due diligence on risk and change at a time when uncertainty rules. In the current environment, they need to meet more frequently and make strategic decisions with potentially long-reaching consequences while keeping participants physically safe. Thus, boards and governments are exploring their options around the timing and conduct of board and annual general shareholder meetings.
Video links and teleconferencing have thus come to the fore. Banks in the Philippines and Singapore have been the first to take board meetings and shareholder meetings online. Similarly, India’s Ministry of Corporate Affairs has relaxed guidelines to allow companies to hold virtual AGMs.
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The boardroom challenge
Good corporate governance has never been more critical, yet financial institution boards of directors face a quandary.
They must strike a careful balance between many competing demands. Their businesses are providing stressed borrowers with payment holidays and moratoriums to keep the economy moving and prevent companies from failing. At the same time, boards must maintain the rigorous, independent oversight required to carry out their strict legal and fiduciary duty of care.
There are challenges of this type at every turn. While ASEAN banks prepare for a wave of bad loans, government officials demand simpler access to new loans while maintaining high lending standards. At the same time, financial service boards are required to monitor risk closely and follow strict international rules of accounting and auditing.
And at the same time as they are monitoring this risk, the banking landscape is undergoing seismic shifts.
Preparing for a digital ‘new normal’
While boards grapple with risk in a deteriorating economy, managers are playing catch up as the customer embrace of online banking and service delivery accelerates.
Banks across Asia are rapidly upgrading their digital offerings. In Hong Kong, HSBC saw in March that use of its mobile was up 40% year-on-year, while Citibank saw a 37% increase in wealth management transactions. In Thailand, the steep rise in mobile banking has led some banks to review their number of branches. Even in Cambodia’s relatively underdeveloped banking sector, fintech companies are beginning to see steady growth.
In any case, banks across India and Asia are going to have to adjust how they do face to face banking. Contactless payment systems are accelerating cash’s decline, especially as it can be a vector for COVID-19 (and other infections).
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Traditional banks also face stiff competition from new tech-savvy digital-only banks. Singapore and Hong Kong recently granted 13 digital banking licenses between them to non-bank financial institutions, allowing them to provide loans and deposits. Over the next five years, as many as 100 more digital banks may emerge across South East Asia.
The pace of change is increasing, with lockdowns and new digital-only services seeing traditional brick-and-mortar banks scrambling to expand their online channels.
For example, some have installed video services and help features such as two-way messaging within their mobile apps. China-based fintech OneConnect is helping banks across South East Asia with digital onboarding through facial recognition software and biometric authentication. That means no more going into a branch to open an account.
The other big push is integrating AI to offer personalised services, as consumers demand simpler, seamless user experiences within digital products. Some apps even provide advice on spending. With more user data, services can be expanded and personalised, further improving the customer experience.
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A new way of meeting?
Adopting a modern governance system is essential. A single, unified suite of applications providing a secure environment for meeting and messaging, document sharing, collaboration, voting, minuting and more is the best way to manage a board.
That’s why, in March, Diligent announced an update to its video conferencing facilities for its Board management applications.
The update means participants can join a confidential virtual meeting with a single click from any app within its suite of secure board applications. This new feature mitigates the security risk of a stray link making its way into high level and confidential meetings through an unsecured device.
Diligent’s increased security measures are ‘baked in’ to the software. They are an effective response to the so-called ‘Zoom bombings’ early in the pandemic, when companies across the world were trying to find their virtual feet. The upgrade can give confidence to bank boards and executives.
In light of the physical distancing restrictions and with no sign of a vaccine anytime soon, Diligent is helping boards adapt to a more digital and virtual world. With the right investment, boards can position themselves – and the financial institutions they govern – for long-term success in the post-COVID world, whatever shape it takes.
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