The COVID-19 crisis has resulted in significant operational, financial, and human capital risks for the BFSI sector.
Of the headline risks, Banks are facing today – the foremost is around repayment of loans. With the major banks in India showing great resilience through their uninterrupted services and building flexibilities like staggering EMIs, providing moratoriums or waiving fees to consumers and small businesses, it will eventually boil down to their profitability concerns and the credit risk associated with it, unless the regulators and policymakers provide a cushion.
Sustained quarantines and widespread business closure would surely hit credit card and corporate lending businesses among others, while at the same time make public access to certain banking services relatively difficult, especially in tier 2 and 3 cities and rural India.
Another significant challenge links to employee wellbeing, engagement and productivity. With banks being classified as an essential service, precautions are having to be taken to protect both branch staff and customers. For the financial services sector, unavailability of a large segment of employees could severely impact cash distribution, retail bank branches, claims processing and other highly human-dependent tasks.
A highly underrated risk in India is related to cybercrime. Cybercriminals are likely to take this opportunity when it comes to identifying vulnerabilities in infrastructure and defenses, to spread ransomware infections, malware and launch other cyber threat campaigns. In addition to this, high volume of employees with remote login facilities may make it easier for cybercriminals, infiltrating a network through remote desktop services, to stay hidden to identify and access systems with sensitive data.
Another key factor to consider is volatile stock market driven by prevailing negative sentiments in the near term poses a huge investment risk associated to the large portfolios of banks in India.
It would be difficult to predict in advance the impact of a COVID-19 on Retail insurance claims. Insurance houses are deeply and directly impacted at this hour of global crisis. With the Indian Insurance regulator directing insurers to be prepared with COVID-19 claims and timely payouts as well as providing a grace period for motor and health covers, a whole new range of products and coverages are being sought. Quick and efficient product design and approvals, accurate risk pricing and adequate capacities for these covers are some immediate challenges that must be overcome.
In summary, the need of the hour for India’s BFSI sector is to invest in thorough business continuity plans, careful and prudent risk management strategies, and resilient workplace cultures. History reminds us that high-performing companies remain committed to their employees as well as their organisational purpose and values, especially during difficult times.
Views expressed in this article are the personal opinion of Sumit Dutt, Head – Sales and Client Management, Corporate Risk and Broking, Willis Towers Watson India Insurance Brokers and Rajiv Kumar Gupta, BFSI Practice Leader, Willis Towers Watson India.