The COVID-19 pandemic has caused unique humanitarian disruptions and has rapidly developed into the most significant economic crisis in living memory. It is already clear that the impact on our reality and everyday lives will be felt long after the virus has been contained.
The financial services sector has historically faced several crises and has developed effective mechanisms to handle market volatility and risks. Better one could argue than the traditional non-financial sectors.
The industry has managed to create robust business continuity arrangements in all areas of operations. Still, however, now facing one of the most significant challenges of our time.
Financial institutions must now navigate not only an economy in recession but one where COVID-19 is disrupting business models and testing operational resilience.
These newly emerging social, political and economic conditions are putting these arrangements “to the test”. It is no longer “business as usual”.
The workforce shift from in-house to remote raises several concerns regarding communication, social interaction and security. The reallocation of resources and the establishment of new operational systems needed to face this new status quo is a formidable challenge on its own.
Organisations need to adapt and ensure that the AML, risk management, and internal controls will continue to operate robustly and potentially anticipate risk areas that never needed consideration before.
This new worldwide economic state of affairs created by the Covid-19 pandemic should be seen as an opportunity to “stress test” the resilience of the operational and risk management frameworks by the supervisees and supervisors. The industry should, in fact, learn from this experience and become stronger.
At the same time, the importance of a robust legal and regulatory framework is ever so evident. The regulators’ supervisory actions are dictated by the regulatory framework. Both are now in the spotlight, with the market’s expectations running high.
As the post-pandemic economy gradually begins to recover, the Cyprus Financial Services Industry shows remarkable resilience signs.
The industry shows a positive outlook, with a continuous increase in assets under management. The Cyprus Securities and Exchange Commission (CySEC) continued to examine new applications to license new regulated entities without any interruption. The 2020 statistics show impressive results. According to the Regulator’s statistics, the number of entities under its supervision increased by 4.42% compared to 2019. The volume of assets managed by management companies in the fourth quarter of 2020 increased by almost 3.79% compared to the same quarter of 2019.
The continuous efforts in updating and upgrading its legislative and regulatory frameworks, backed up by its strong network of professional service providers, have ensured that Cyprus is becoming one of the top emerging investment fund centres in Europe.
Testament to these efforts is the fact that the Cyprus financial sector has managed to cut through the Covid-19 shock wave unscathed.
However, for Cyprus to maintain its leading role as a financial centre in the post-COVID-19 era, more work needs to be done.
Incentives must be introduced to attract new key players with international operations. Bureaucracy must be further reduced, response times improved, and further modernisation of the Banking and Public sector must be swiftly implemented.
These challenges are difficult but far from Unsurmountable. Cyprus has shown throughout the decades that it is capable to successfully tackle economic challenges, a tribute to the Cypriot perseverance mentality.
It is this mentality that will “grab the bull by its horns” and steer the island’s financial sector in the direction of improvement, resilience and growth, solidifying its significant contribution to the island’s economy.
This article by our Founder Xenia Neophytou was featured in the Editorial of the Great Britain – Cyprus Business Association’s E-Newspaper.