Will remote work really function long term for financial institutions?
Cybersecurity and compliance challenges have banks carefully considering home versus office
President Joe Biden’s plans to reinstate Wall Street oversight remains a major focus as his appointed regulators await senate confirmation. This has many banks wondering whether flexible work from home policies, implemented out of necessity during the pandemic, will survive a potential era of increased regulation, which was scaled back during the previous administration.
With cybersecurity attacks on the rise, in addition to regulation likely coming down the pike that may limit the flexibility of select employees, many banks are taking a wait-and-see approach to their office space, rather than making declarations — as many in the tech industry have — that a significant portion of remote work is here to stay.
“The challenges around compliance and security are important factors when it comes to bank’s decisions on where their people can work,” says Giles Wrench, Corporate Solutions, JLL. “This is an industry that is used to having their people in a controlled environment, and for which regulation is a greater factor than for almost any other office intensive user. The reality is there’s a lot of indecision and waiting to see before deciding who can work remotely long term.”
When pandemic lockdowns turned many jobs into remote jobs almost overnight, some industries experienced relatively seamless transitions. Banking was not one of them, says Erin Patterson, Senior Vice President, JLL Consulting.
“Many banks had to pivot from a traditional point of view that office work should be done at the office,” she says.
But the great work-from-home experiment hasn’t been without challenges, especially for the banking industry. Fraudulent activity and cybersecurity attacks are on the rise, with risk and vulnerability accentuated during the pandemic. Financial employees in particular are at heightened risk, given high sensitivity of transactional and confidential information dealt with on a daily basis. Those working from home are more vulnerable to phishing and other technology breaches, as well as the risk of other household members using devices that are meant only for the employee, Patterson says.
And while video conferencing has skyrocketed during the pandemic, many virtual engagement platforms have security standards that are sub-optimal for the banking industry’s needs. Banks' firewalls, for example, often don't permit file sharing across these types of platforms as they can reach external parties. Breaches to these platforms that have occurred both pre- and during the pandemic have put banks on heightened alert for cyberattacks.
Financial institutions will be hit with these challenges to remote work first because they are held to such a high standard with regulations, and there is a lot of red tape to get through technology decisions.
“This last year was really a ‘do what you need to do’ transition to remote work that had to happen at a fast pace without much analysis,” Patterson says. “Now, a lot of banks are asking, is this actually the right approach or is this putting us at risk?”
Over the last four years, regulations were scaled back, allowing the banking industry some flexibility to iron out working from home. The reinstatement of some of those regulations is likely on the horizon, Patterson says.
If implemented, those regulations will most likely require workers whose jobs need to be closely monitored for compliance purposes to return to the office. Namely, those who are doing transactions. Jobs that have stringent compliance requirements, high-risk profile portfolios, or highly confidential company or customer data could return to the office in this scenario, while others adopt hybrid work.
“Banks and financial institutions were put in a remote environment where they had to make it work, and as a result likely made security concessions that wouldn't normally be permitted,” Patterson says. “This is a short-term situation. For other industries that don’t have to think about regulatory constraints, there is much more flexibility.”
There is also the issue of efficiency. Some banking jobs have been chugging along with remote work, but at a significant loss to productivity, Wrench says. Even with improved home network speeds and access through VPN, home networks still do not have the same degree of security or consistency as a bank’s office environment.
“It’s not solely because traders need to be on a trading floor for speed of trades or security, although it simplifies matters to be in a controlled environment,” he says. “The real reason is that traders are better at their jobs when they can see, listen and talk to their fellow traders in person. The human interaction cannot be replicated on a virtual call.”.
Competing for talent
Prior to the pandemic, financial institutions were looking for ways to offer more flexible work as a way to compete for talent that might otherwise go to the tech industry or others with flexible policies.
“Now, many financial institutions are wondering how to pull back on some elements of remote work while still attracting talent. What technology should I incorporate to secure remote networks longer term? And when regulations resurface, will that much-desired flexibility still be possible?” says Patterson.
Oftentimes, the balancing act between compliance and mitigating security risks on the one hand and attracting employees with flexible policies on the other has financial institutions at odds with themselves. One department may want everyone to work remotely while another may want most people back to reduce risk.
“There is a lot of uncertainty at the leadership level and a lot of asking what others are doing,” Patterson says, pointing to a JLL survey that showed 24 percent of financial companies are unsure of whether their real estate footprint will change in the medium term.
Many companies are awaiting more clarity even as they also balance employees’ desires for more flexible work. And the idea of reducing their real estate footprint—and therefore their bottom line—is appealing as well.
“Right now, many organizations have realized certain functions and workers don’t actually need to be in the office,” Wrench says. “Call center productivity can be tracked via technology and we’ve seen several banking clients cancel lease negotiations as they move that function to an almost entirely remote setup.”
But most companies are waiting to make decisions beyond that until there is more clarity on what a post-pandemic world looks like. Part of the reason, Wrench says, is because to do otherwise carries a significant cost risk.
“If a bank wishes to adopt hybrid work, it will require some element of a ‘free address’ workplace, otherwise they will be swimming in empty desks on the days employees are working remotely,” he says.
Many banks have been reticent to embrace the cloud and virtualization technologies, Wrench says. Hybrid work necessitates this to change – at great expense.
“On top of that you are going to need desk and room booking technology, most likely a smartphone app that simplifies the experience for the employee in the new environment, and change management to help employees navigate their new workplaces,” he says. “Add on the complexity of a changing regulatory environment and it could be a very costly endeavor to have to change strategies again because hybrid work failed to be the productivity boon bank’s expected.”