Financial services boards should be adding a “T” for technology to their headline ESG concerns if they wish to properly adapt to managing modern businesses in the wake of the pandemic.

The warning comes from Clara Durodié, a non-executive director, digital strategist and author of the bestselling business book Decoding AI in Financial Services, speaking at a Board Agenda webinar.

She warned that financial services companies face a host of technology issues when it come to the adoption of technology which, at its core, she adds, is about using artificial intelligence.

Durodié called on boards to reflect on the ESG narrative, and add a T for technology because it touches on so many governance concerns.

“We, as either companies building this technology or using and maintaining it, need to ask ourselves a lot of questions regarding the ethical audibility, transparency of the systems and how we can correct them when they’re getting thing wrong,” she said.

Hybrid working

Durodié was speaking as part of a panel of experts discussing the future of financial services in a post-pandemic world. Fellow panellists include Professor Kern Alexander of the University of Zurich and Elisabeth Stheeman, an external member of the Bank of England’s financial policy committee and a former adviser to the Prudential Regulation Authority.

Durodié added that after the pandemic she believes there will be many gains as staff work from home. But remaining in a hybrid working mode means relying on technology and that entail some “core considerations” including security.

“Cybersecurity is a huge conversation we need to have with continuous monitoring. But also we need to train people to use systems safely,” she said.

She also advocated for a reconsideration of the way work is monitored. Tracking technology, she said, is one way to introduce surveillance.

“I hear a lot of heads of HR saying, ‘We need to have this so we are 100% sure that people actually spend the time working we pay them for’.

“My submission is that we need to use the Covid crisis to redefine the way we trust people and the way we engage with staff.

“Using software to track people’s eyeballs while they’re working on different documents—that’s not the way to build trust, I would argue. There are other ways.”

Alexander warned that regulators have been looking at the implications of more working from home for financial services firms. He said home-working creates both operational and technological risks. “These are the things regulators are concerned about,” he said.

Unexpected crises

There has been much learning as a result of the pandemic. “Regulators and bank boards have learned that there needs to be a focus on what happens if an unexpected crisis happens,” said Alexander. The pandemic raised questions about issues as diverse as share buybacks, dividends and bonuses.

“It’s not just something for the board to decide,” he added. “The board needs to have a very interactive relationship with the bank supervisor and be sensitive about what in normal times would be considered an ordinary practice.”

Elisabeth Stheeman said more mundane banking subjects were raised by the crisis too, such as lending portfolios which may be transformed by Covid, especially for specific industry groups such as hospitality, travel property and airlines. And while ESG has been lifted up the agenda by the pandemic, financial services will also have an emphasis on the “S”— social, Stheeman said.

“What’s particularly changed and increased in focus is the social. So, having a bigger focus on employee wellbeing and bringing that up more on the board’s agenda, which I certainly think is a good thing.”

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