The World Health Organisation (“WHO”) has now officially classified the COVID-19 outbreak as a Pandemic. This means that there is evidence of uncontrolled spread from human to human in multiple countries within a WHO region and in two or more regions.
Cyprus government announced proactive drastic measures in order to protect and inform its citizens on how to prevent and limit the potential spread of the virus. Among the precautionary measures taken to prevent the coronavirus spread, the Cyprus Government banned meetings and public events of more than 75 people, closed all schools and universities, postponed football games until further notice and issued guidelines for self-isolation/quarantine to people who recently visited countries where COVID-19 cases have occurred or had contact with someone who has tested positive to the virus. More details with respect to the measures recommended by the Government of Cyprus can be found here.
In light of the recent developments, the financial industry is expected to be negatively affected and as such the EU Competent Authorities suggested proactive measures to be taken in order to mitigate the negative impact. Specifically, according to Circular C358 issued by CySEC as well as the Public Statement issued on 12 March 2020 by ESMA, financial market participants should take actions for COVID-19 impact including application of contingency plans and deployment of business continuity measures, in order to ensure operational continuity in line with regulatory obligations.
Financial Institutions are advised to revisit their business continuity plans to ensure appropriate measure are in place to deal with major events. Moreover, the exposure of a firm to operational risk may increase during times of significant change to its organisation, infrastructure and business operating environment. Before, during, and after expected changes, a firm should assess and monitor their effect on its risk profile. This includes cases to evaluate and manage the exposure to operational risk including low-frequency high-severity events. The measures taken to mitigate the operational risk exposure include the following:
- Make arrangements for employees to work remotely, if needed;
- Revisit the replacement policy;
- Control the travel plans of employees.
Firms must also take into account the impact of issues such as a Pandemic when carrying out their Internal Capital Adequacy Assessment Process (“ICAAP”) and assess the impact on cash flow. Firms must monitor capital and cash flow at least monthly (and more frequently where required or where prudent to do so). Moreover, firms must understand that as regulators expect these issues to have been planned for and provided for, there is no appetite from regulators to excuse non-compliance. If your firm is in any danger of not remaining compliant (even if that appears remote at this stage), please contact us immediately so that we can assist you with corrective or remedial action or in managing the situation with your regulator(s).
In the event that your risk assessment, risk mitigation, business continuity plan, ICAAP or liquidity/cash flow plan needs to be updated or re-modelled to reflect the new facts of your situation, please do not hesitate to contact Complyport EU (formerly MAP S.Platis) Group Risk Management Experts at +357 2287 7744 or via email at cad@mapsplatis.com
