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Weathering the storm – A CFO’s 10 steps for building resilience into your fintech strategy

This week our thoughts are turning to building business resilience for the future – and the steps we can take to deal with the situation now and that will help us prepare for what’s next.

10 steps for managing in a post Covid-19 world and building resilience for fintechs and SMEs in the financial services sector.

1. Cash is king   

  • Hold enough liquid cash in some accessible form, equal to 90 days of your working capital needs, irrespective of where you sit in the fintech ecosystem.  
  • Understand your flows of cash and identify ways to keep them open. 
  • Diversify your exposures especially your correspondent banks as your banker –  to ensure they can cope with volumes at a time of crises, but more importantly that they have the flexibility to withstand shocks to the banking system. Ideally you would have more than two accounts – perhaps with two smaller but reputable banks or funding sources. These might include challenger banks (ensuring their correspondents are  among the Big 10) and one or two stable, ‘too big to fail’ banks. 
  • Ensure your scenario testing is up to date for your ICAAP/ ILAS and is appropriately stressed. Naturally you may not be dual regulated or indeed regulated at all. Noting some form of stressed scenario planning is vital.
  • Depending on your regulatory permissions, always have additional liquidity over your stressed positions and preferably earning some return which can be accessed with 60 days’ notice. Over and above your 90 days minimum. Hence adequate liquidity buffers. 
  • Utilise revolving credit facilities you would have previously negotiated and ensure you have liquidity buffers in place that more than match you worst case scenario assumptions from your ILAS/ICAAP. 
  • Cross jurisdictional liquid and semi-liquid assets you could access should your local jurisdiction be frozen. 

2. Immediately assess your counterparty exposures and creditors, determine your working capital needs and trading patterns 

  • Establish a cash meeting. Ask your CFO to arrange sessions at more regular intervals, I would suggest twice a week or more depending on your business, in the form of a Cash and Liquidity Committee with your best Finance Directors and Project Managers overseeing credit, cash and revenue.  
  • Identify revenue and trading risks and ask your teams, front office and sales people and supplier relationship managers, in order to communicate quickly and effectively at keeping the flow of opportunities, cash and revenue moving, consider margin reductions or cash call mitigations. 
  •  Recognise it’s not business as usual, rather a different world, however reinforce that the procedures and processes utilised should be same.  

3. Capital plans and Scenario planning – Invoke the plan 

  • I cannot stress enough how important is it that ICAAP and ILAS and operational planning be embedded through the Board and for accountability to sit with your CTO and COO using the Chief Risk Officer and first line risk teams to challenge and plan for outages, people and system failures. 
  • Robust and extreme but plausible scenario planning must encompass business specific and global and environmental threats.  I am certain many institutions did not have a COVID-19 type pandemic in their scenario planning which may bring into policy some further caution in the future and result in Regulators insisting sector wide all capital plans force higher capital and liquidity buffers. Price that into your evolving plans. 

4. Regulator and third-party communication  

  • It is imperative to ensure you immediately begin a dialogue with your local regulator even if it is to say your crisis and operational plans are working in line with your intended plan.  If they are not, it is better to have honest conversations about possible issues with your business sooner than later. 
  • Your communications strategy should where possible be an honest, transparent and factual representation of the truth to enable your customers, employees, partners, investors, regulators and counterparties to understand your current and future situation to ensure you are trading your way out of the problem and are resilient. 
  • Appoint a crisis communication, or PR person to oversee, or channel communications to a centralized person – and make sure that messaging is consistent.
  • Ensure your customers are at the centre of your thoughts ensuring you retain them, earn their trust and most critically treat them fairly.

5. Robust and realistic ICAAP/ ILAS/ Solvency 2

  • Ensure you have a robust and Board approved wind-down plan, scenario planning and operational infrastructure that is really embedded into the life of your organisation.   
  • The wind-down plan is an Armageddon style orderly document that allows for all creditors/depositors to be repaid with the minimum of pain to shareholders and investors while minimising asset forfeiture and loss to investment. It should be annually approved by the Board and part of your scenario planning.  Essentially a document to pull out and use as a crisis plan. 
  • Ensure you keep this document up to date and refresh it every 6-12 months.

6. Bring in specialists to help your top team

  1. Quickly source and have on call experienced professionals who have lived through previous crises including the banking crises and recessions.  
  2. Ensure there is enough experience in operations, finance and communications teams as priority areas. This kind of flexibility and knowledge will always help you, especially if there is a young team in place.

7. Your top team should include experienced interims and turnaround specialists. 

  • Appoint a head of Operations Crisis management with project management to support them to help you across finance, operations and critical areas like technology, communications, treasury, and the front office. Let them run daily meetings – like daily 30-minute report back sessions – to allow project managers to keep the executive team informed of daily progress.

8. Remote working and virtual meet-ups 

  • Work remotely or with a virtual team and where appropriate some central team in your headquarters or designated backup site.   
  • Always have a variety of policies that never centralises all decision makers.  Rather have a good mix of your executive and operations teams in person, virtually, and in back up sites. 

9. Remote servers and cloud technology

Have a good mix of backup servers and hardware that is tangible and in a specific location. Ensure IT, phone and voice services are decentralised and have backups.

  • Cloud technology is a great solution, but beware of systems capability and capacity in times of business stress. You should have some degree of control over your technology in a time of crises, and not simply rely on cloud technology, especially where there is a systematic global issue. 
  • Ensure there is additional resource devoted to cyber-crime and fraud as these tend to increase in times of crises.

10. Attitude, and leadership 

Good leadership done properly will mean you have increased productivity and loyalty from employees but also have a happier customer base.

  • Lead from the front.  
  • Be honest with all levels of staff on the severity of the crises.    
  • Have honest conversations, and treat people as grown-ups.   
  • Let them give your team the solutions and ideas necessary to get out of the problem.  
  • Don’t panic, be calm and focused where possible. 
  • Laugh when you can. 
  • Give you and your team’s time for family and make sure they look after themselves.

Doing all these things and most crucially reminding your team of crisis planning will give all, including you the leader, the skills to come out the other end. 

All the best and good luck!  

Stay informed. For more information and insight – join our global briefings series over the next few weeks as we talk to fintech founders, ecosystem partners and institutions on the impact of coronavirus, and what comes next.

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