4 Operating Model be redirected to initiatives with short-term impact, such as improving digital Adjustments, Cost servicingcapabilitiesorbuildingaloanmodificationworkflowforcallcenters.Our experienceisthatvirtualcallcenterscanbestoodupindaystobetterutilizestaff Control, andInnovation who may be working at home – and you may need those staff members to scale up basic customeradvice. Because of the cumulative impact of the factors discussed above, there Weexpectdeadlinestobepushedoutonmanyregulatoryprograms.Thismay will inevitably be a misalignment of short-term costs and revenues in the freeupresourcesandcapabilitiestoworkonotherthings,andbanksshouldbe bankingsectorforatleastthenextfewquarters.Oureconomicmodelling proactiveintheirconversationswithregulatorsaboutwhatispossible. suggests a range of impact from a 50 to 100 percent drop in PBT, using Banks also need to work both sides of this problem. They should certainly assumptionsaboutrisingriskcostsandrevenuecompression.These lookaftertheircustomers,buttheyalsoneedtobeflexiblewithvendorsand areglobalnumbers,butclearlythestartingpointwillmakeadifference suppliersintermsofserviceprovisionandcontractterms(andyes,wedoinclude – robust bank profitability in markets like Canada and the US (where Accentureinthatstatement).Whilelimitingviruscontagionisthenumber theROEofthebiggestbanksinFY2019averaged12.2percent)provide one priority, banks also have an important role to play in preventing economic moreofacushionthanthealreadyfragilebankingeconomicsinmany contagion.Thatcoversnotonlyhowtheytreattheircustomers,butalsohowthey Europeancountries(averageROE6.2percent). treat those who have the banks themselves as their customers. For example, this Whatisclearisthatthedemandsofthenextfourtosixmonthswillnot may be an opportunity to look at procurement processes and ask whether there bewhatyouexpectedsixweeksago,andbanksshouldrespondwithas is a waytoshiftmorespendtolocalSMEsthatmaybestruggling,ratherthanjust much flexibility aspossible. optimizingspendamongmajorvendors. Forastart,everybankneedstothinkaboutthetasksassignedtoits“war Having indicated what it will take for banks to respond in the short-term, they room”.COVID-19crisismanagementneedstodealnotonlywithbusiness alsoneedtoprepareformultiple,rapidcyclesofdemand/supplyrealignment. continuity issues but also the panoply of business issues outlined above. Forexample,inChina,whereinfectionratespeakedatover3,800adayin There needs to be tight coordination of actions across investments, mid-February,justfourweekslatertheinfectionratehasdroppedtobelow20a regulators, customer groups, employees, trade associations, and the dayandfactoriesarerapidlyresumingproduction.Publishednumberssuggest many otherstakeholders. workflowtrafficandcoreconsumptionarebackto80to90percentofnormal levels and production resumption rates are approximately 95 percent for big As a matter of urgency, banks need to review and prioritize project companiesand60percentforsmallercompanies.* expendituresandassesswhatcanbeslowed/stoppedandwhatcan 20 COVID-19: Open letter to retail and commercial banking CEOs * Coronavirus and Markets: A Special UBS CIO webcast, 17 March 2020