This article was first published on October 1, 2020.

Editor's note: Oliver Wyman is monitoring the COVID-19 events in real time, and we have compiled resources to help our clients and the industries they serve. Please continue to monitor the Responding To Coronavirus Hub for updates.

This year has been an exceptional year. The economic cost of the coronavirus (COVID-19) pandemic has been enormous, with Q2 2020 showing the single worst GDP growth on record for most major countries, and unemployment growing to record levels. Government have responded with unparalleled and previously unthinkable levels of stimulus and other measures to protect lives, jobs, and the economy.

For the banking sector, this saw a thorough testing of business continuity plans, and disruption to operating models. It also caused an immediate crash in financial markets, and is gradually playing out in heightened non-performing loans (NPLs) and provisions. With enforced debt postponements in place in many countries, the credit cycle is expected to peak in 2021, rather than this year.

There’s an old adage of “never waste a good crisis”, so what can be learnt about risk capabilities and balance sheet from the experience of the last six months? Here’s eight ideas:

Analytics

In analytics it is time for industry-level credit analysis, as well as forward-looking cashflow modelling. More analytics and more expert judgement will also be needed.

Balance sheet strategy

In terms of strategy for balance sheets, it is a time for nimbleness and imagination, to reconsider capital, and prepare for low rates.

Operating model

Finally, when looking at the operating model it is time to gear up and embrace for working from home, as well as re-evaluating the operating model itself.

If you would like more detail on the eight ideas outlined above, please download the full version on the article below or listen to our podcast.