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The Great Resignation’s impact on Financial Institutions

    The Knowledge
    30th June 2022

    If your clients are struggling to attract and retain talent, they’ve got plenty of company. In the UK, people are resigning from their jobs at rates not seen since 2009. Many of these workers aren’t simply moving on to more appealing positions with new employers. According to Sanjay Raja, chief UK economist at Deutsche Bank, elevated levels of workers are leaving the labour market entirely.

    Financial institutions are far from alone in having to manage the strains of this “Great Resignation,” which has taken root around the world and across sectors. However, they are feeling the challenges differently than organisations in other sectors might, and are facing different risks. Financial firms need employees who have specialist skills – and those skills are even more difficult to source and retain now that organisations of all kinds are short-staffed as well as an increase in offering new flexibility and benefits to attract talent.

    This has changed the risk environment for financial institutions. The lack of available skills within an organisation can negatively impact productivity. With many businesses looking to compete for the same talent, this can lead to unexpected increases in expenditure for hiring and training in order to attract the most skilled individuals. If a financial institution has fewer staff than it should and has a greater demand for its services, it could also experience an increase in negligence claims on top of the other challenges.

    To manage these pressures, it is likely that we’ll see more consolidation ahead. There has been an unprecedented level of mergers and acquisitions in the last 2 years and this is unlikely to stop in 2022. More M&A often leads to increased claims due to breach of warranty or misrepresentation, or incorrect valuations. We’re keeping an eye on M&A developments in the market, but brokers can help their clients anticipate some of the risks associated with consolidation and minimise their exposures.

    As clients navigate the changing workplace, brokers can also be a sounding board for those who are making changes in order to retain and engage staff. While there does seem to be an air of eagerness within financial institutions to return to the office, there is also a need to strike the right balance between that and offering a flexible or hybrid work model. The thirty UK companies taking part in a six-month trial of a four-day work week this year may have some lessons to share about the rewards as well as the risks of the change. We currently insure a bank that has switched to a four-day work week to retain staff – so far the response has been really positive. It will be intriguing to see if this is the start of a new trend for financial institutions.

    Walid Youssef is Head of Financial Institutions at Travelers Europe.