As states consider whether to extend or lift stay-at-home orders, we have reached out to various Financial Services clients to discuss what challenges they anticipate in “getting back to work” and what that means in our financial services sector. Many of our clients have been working harder than ever and “getting back to work” really means “getting back to work under the new normal”. What is that “new normal” and how will our clients lead into the coming months and leverage and the positive lessons we have learned from the current situation? As a result of a number of discussions with bankers, in-house counsel and borrower contacts, the below are some early trends and industry views that we are seeing.

1. MAINTANING THE POSITIVE LESSONS LEARNED

Communication and Technology

A senior banking client remarked that “[t]imes like these have provided lots of opportunities to discuss the general landscape and bring some additional value in our thought leadership—communication is more frequent than ever. Many clients have shared similar sentiments and it has been widely reported that as a result of the COVID-19 crisis, an increased number of inclusive team meetings were being held and more deliberate efforts to stay in contact with colleagues were being exerted. Technology has been identified as an integral facilitator, with one contact observing, “I’ve been on more video calls in the past week than in the past decade” and feedback received that texting and video calling clients and coworkers has become the new norm. We are seeing a trend that much of this focus on “connectivity” is helping galvanize internal teams in ways that were not seen pre-crisis, and many clients have remarked that there is a hope such a level of connectivity will continue.

Institutions have also moved quickly to make other types of necessary accommodations, including handling issues such as “electronic signature(s), [and] remote access for things like check signers, etc.” Others noted that “everybody has been forced to get up to speed and embrace existing technology now there isn’t someone else next to them who can help out”. As a result, whole teams are now more adept at using existing technology with increased efficiency and comfort. Leaders are finding new ways to leverage technology both in their team management and in client-facing activities.

While those within close-knit teams in open floorplan environments naturally noted certain struggles, overwhelmingly clients have reported that perceived difficulties have largely been overcome. This was vital given the exceptionally-high workloads many have experienced since the COVID-19 crisis. A borrower client speculated that it is likely we will see yet more innovation and attitude shifts due to the “full-on crash course in working from home and adoption of new technology”.

Changed Perspectives on Working from Home

Many of our clients have identified that the current pandemic has demonstrated how productive we can still be while working remotely, with a senior banker noting that he was “ninety per cent as efficient working from home” and if he “could print, it would be high nineties”. He also expressed appreciation that his company has for some time supported remote work environments.

While some banks and other companies previously restricted working from home, many anticipated that experiences gained from the COVID-19 environment could act as a catalyst for a shift in policies, extending beyond the repercussions of the pandemic. It was hoped that employers would understand (and perhaps encourage) working from home to accommodate alternative working schedules and other future needs. Indeed, it was noted that the generation of “millennial-inspired” priorities that often revolve around quality of life may require such a shift to enable institutions to better recruit and retain a more skilled work force. In support of this, Bentley University’s “PreparedU Project” found that 77% of millennials believe a flexible working schedule would make them more productive.

Bank and borrower contacts alike further identified potential benefits to businesses from continued working-from-home arrangements. It was proffered by a borrower client that companies may opt to reduce lease space in premium locations if certain staff can work from home all or a portion of the time. Likewise, there may be a shift to employing more people outside of big cities to reduce salaries as well as rent, and interstate travel may be re-evaluated to account for tightening budgets in the age of improving technology. Other concepts such as “hoteling” or other reduced uses of leased space could certainly become the “new normal” for business reasons in addition to the immediacy of COVID-19 concerns that will immediately increase the need for more space in working environments, weekly “shifts” of in-office workers, and other innovations needed to combat the immediate pandemic.

Opportunity to Focus on Institutional Improvements

It was noted that many leaders have shown an increased interest in ensuring that their teams are progressing, both personally and professionally, in this time of need, with a greater focus on team-building, which can often take a backseat to day-to-day exigencies under normal conditions. Indeed, many mentioned that it was foreseeable that teams based in different locations may find that their relationships improve as barriers to cross-staffing on projects among multiple offices erode. New working relationships are developing as members of organizations have the opportunity to work cross-office and cross-platform with colleagues they previously haven’t interacted with.

Other market players, including a particular in-house counsel, raised that occasional downtime had afforded the opportunity to attend to vital projects, which could previously not be undertaken in busier in-office times. Such projects included streamlining processes, drafting memoranda on common issues faced on deals and working on an electronic signature policy, all of which would improve practices going forward. The need to examine and develop various policies, such as hiring procedures and medical leave benefits, may be a theme that continues well into the coming months.

2. RELATIONSHIPS ARE THE KEY TO OVERCOMING NEW CHALLENGES

Adapting to new working conditions

Social distancing requirements within the office were identified as the main challenge to returning to work under the “new normal”. A banker identified that a proposed office plan had been communicated in which each employee would sit at least six feet from any colleague—such an arrangement is easy for professional services firms used to individual offices, but presents challenges for trading floor or other open floorplan environments. But, not surprisingly, many clients predicted their own employer would be required to follow a similar protocol. Indeed, it was raised that in the longer term, the potential of similar pandemics may revise the trend towards open floorplan office spaces. The feasibility of working in high rise offices was also identified as a major issue, with social distancing restrictions likely to limit elevator occupants to a very few at any time, and elevator queues keeping people six feet apart.

An in-house client questioned how trading floors will be treated, and predicted that certain employees, such as traders, would be required to be back in the office as soon as possible. Meanwhile, it was expected that others, such as in-house counsel as well as regulatory and compliance colleagues, would likely be requested to stay working at home for longer, in part to free up space to facilitate modified office plans. This raised oversight concerns, and it was suggested that there may be guidelines as to the minimum number of regulatory or compliance staff required to be in the office at any one time, which may cause teams to become fragmented and feel disjointed. Institutions will need to carefully take into account all of these dynamics as their teams return to work under the “new normal”. The leaders will be those firms that leverage the connectivity and esprit-de-corps learned from working-from-home into a workable office dynamic for the coming months.

The importance of maintaining and further enhancing communication once offices begin reopening was emphasized, as well as the need to continue the focus on team-building. While the temptation for those immediately returning to the office may be to return to the previous status quo of hierarchical information sharing, it was stressed that it is vital that everyone be kept “in the loop”. Institutions and individuals should be looking to use the strategies currently employed to further deepen team bonds no matter where members are located.

Standing by Borrowers facing new market conditions

Borrower clients stressed that logistical issues shared with banks were likely to be even more burdensome for them in certain sectors. For those reliant on in-person sales, social distancing requirements would not only create issues in getting employees to work on public transportation and situated in a safe workspace; they would also affect foot traffic and the number of customers who attend places of business at any one time, in both cases affecting sales volumes.

Many borrowers will need to innovate to adapt to new market conditions:

• Focus will be on either creating or extending online operations.

• Alternative point-of-sale methods will be explored, from creating temporary partitions to implementation of conveyor-belt food serving.

• Entire infrastructure changes may be necessary, such as a paring back of international supply chains to enable a simultaneous robust domestic setup which can be quickly scaled up.

• Reduced profitability of leased commercial space will affect both landlords and tenants, with current rent obligations being difficult to meet and less demand for new leases or renewals as alternative arrangements and new economic realities are considered.

• New opportunities are also likely to be identified to serve the changing demands of consumers.

A key issue for borrowers looking to implement such innovations is the capital and time cost involved when their own income is likely to be severely reduced. There was also a recognition that for some, such operational changes may either not be viable or would only mitigate the effects of the pandemic. In both cases, a common theme is the need to raise additional liquidity.

However, a challenge for financial institutions will be that data regarding historic performance will be less relevant in the new market that we face at a time of enhanced borrower demand. Echoing comments received by other members of large financial institutions, a senior banker commented that “the importance of established relationships has never been greater” recognizing that this has been the basis of the deals that have made it through the market at the most trying of times. Borrower clients stressed that they will certainly remember institutions who support them in this regard.