COVID-19 was declared a global health emergency of international concern by the World Health Organisation (WHO) on 30 January 2020. The outbreak poses a threat to many organisations and presents a number of business continuity issues for the financial services sector. This article addresses some of the immediate issues which regulated firms in the UAE financial free zones should be considering in order to remain resilient, and compliant. It may also be useful by analogy for firms in the UAE outside the financial free zones, and elsewhere.
Why should financial services firms be concerned about COVID-19?
COVID-19 has the potential to create significant disruption for all businesses and to have varying degrees of commercial impact. In addition to dealing with these issues, regulated firms operating in the Dubai International Financial Centre and the Abu Dhabi Global Market are required to consider the potential regulatory impacts and, importantly, to have in place effective business continuity arrangements.
Both Dubai Financial Services Authority and Financial Services Regulatory Authority rules require firms to have in place "adequate arrangements to ensure that it can continue to function and meet its obligations under [applicable legislation in the financial free zone] in the event of an unforeseen interruption." Firms are also required to keep their business continuity arrangements up to date and regularly tested to ensure their effectiveness.
COVID-19 is likely to test regulated firms' business continuity arrangements and crisis management capability. Although the regulators may have some sympathy in the circumstances, given that firms have had adequate warning, and time to prepare, firms whose business continuity arrangements fail, or result in customer detriment or loss, may face close regulatory scrutiny.
Recommended action plan for COVID-19 readiness
If a firm has not done so already, it should assess the adequacy of its business continuity plan (BCP) in the face of expected COVID-19 developments. Firms should assess whether the BCP is fit for purpose based on current WHO and UAE government guidelines, as well as stress testing against potential worst case scenarios, including key staff or business functions being out of action for two or more weeks. We also recommend that firms:
Develop a COVID-19-specific contingency plan (COVID Plan) which:
addresses all possible business interruption scenarios. For example, firms which execute trades for clients on exchanges should ensure that they can continue to service clients in the event that all their employees need to work from home or remotely in other countries. Insurers need to ensure that they can continue to handle claims, particularly in the medical insurance space;
considers alternative ways of working to prevent spread of infection. For example, home working, increased use of video conferencing and calls to avoid face to face contact; and
includes strategies which deal with possible scenarios, such as a reduction in business or key staff shortages.
Communicate the COVID Plan to key personnel across the business.
Designate a COVID team to take responsibility for operating the COVID Plan should a pandemic occur.
What are the BCP issues that should be addressed immediately?
We recommend that regulated firms address the following matters without delay:
The above list is not exhaustive. Firms need to be prepared to address contingencies and more remote risks as they crystalise. The key to successfully navigating a crisis is to be adequately prepared, communicate effectively, and to be sufficiently flexible to pivot strategically should the need arise.