Financial regulator warns about virtual meetings

The director-general of the Guernsey Financial Services Commission said that changes seen during the pandemic had implications for governance.

Addressing the conference of the Guernsey branch of the Chartered Governance Institute UK & Ireland, he pointed to the difficulty of being spontaneous and engaging in proactive discussion via video conferencing as just one problem.

‘My suspicion is that future academic studies will demonstrate that the replacement of physical meetings with virtual meetings led to the suppression of discussion about difficult things which probably needed to be discussed,’ he said.

‘One of the first lessons you learn as a regulator or police officer is to be extremely sceptical about what you are told because things are frequently not what they seem on an often too polished surface.

‘What I’d implore you to do, when doubtless superintending numerous video boards and committees, is to think not just about what you are seeing but about what you are not seeing and experiencing because you are not in the room with someone.’

During the second lockdown in Guernsey earlier this year, the GFSC tried some virtual firm inspections and those businesses involved cooperated ‘wonderfully’.

‘We found, however, that whilst an electronic file might be shared appropriately it was profoundly difficult to gain a reliable picture of how a firm was actually doing.

‘The quality of our insights were markedly worse than would have been the case from a physical visit – despite the fact that more hours were probably burnt on our virtual visits than would normally be spent on a physical visit as colleagues tried to work harder to compensate for the lack of physical interaction.’

Mr Mason stressed he was not saying that new technology and a reduction in business flights were bad things.

‘What I am saying, however, is that you, as individuals keenly interested in the quality of governance at the institutions you serve, should perhaps be as sceptical as me about claims that new modes of working and holding meetings will lead to better outcomes than those associated with the physical meetings to which we humans have had several thousand years of evolutionary time to adapt to.’

On home working, he said the impact of it on organisational success had yet to be written.

It had helped organisations survive lockdowns, but whether it would help firms thrive in a post-lockdown environment remained to be seen.

‘Our concern, at the regulator, will remain on ensuring that companies are well controlled and profitable regardless of the mode of working their staff employ. I couldn’t accurately predict which side will be up and which down at present,’ he said.

‘As with so many things, we remain somewhat more sceptical about the benefits of home working and more attuned to the downside risks than the average organisation and are likely to maintain that position until we have demonstrable proof that profitability, governance and controls are not materially adversely affected.’