India’s New Restrictions Will Impact Responses to NYDFS’ Demand for COVID-19 Preparedness and Financial Risks Plans
We previously wrote about the New York Department of Financial Services (NYDFS) demand that all regulated companies file descriptions of their preparedness plans, financial risk management plans and assessments, in connection with COVID-19. The due date for this response is April 9, 2020. New information from India may impact, if not complicate, the responses owed to NYDFS for many regulated organizations, especially insurance companies, banks, and credit unions, that employ outsourcing services.
On March 19, 2020, the Indian Ministry of Health and Family Welfare issued requirements for employers to allow as many workers to work from home as possible in the wake of the COVID-19 outbreak.
India is a large source of outsourced services for U.S. companies, including insurance carriers and banks. In fact, over the past 20 years, many financial services companies, and their suppliers, have outsourced significant amounts of work to India, including many back-office functions, finance and accounting functions, claims processing, payment processing, call centers, and more. Contracts for these services include significant security requirements, operational requirements, uptime and related service level guarantees. The outbreak of COVID-19 in India likely and significantly will impact the availability and operations of these services. In addition, even the transition to remote workplaces of a healthy workforce could result in collateral material effects that disrupt services, such as poorer data security controls, lack of a reliable power supply and backup generators, and tenuous telecommunications infrastructure at many homes.
When responding to NYDFS’ demand for operational and financial risk preparedness plans, organizations must account for these contingencies, whether the disruption impacts their own outsourced services, or the services of critical suppliers. As a result, companies that owe responses to NYDFS should scrutinize their outsourcing contracts, and inquire the critical suppliers of their contingency planning to determine what exposure to potential operational disruption they may have. In short, the Indian Ministry of Health and Family Welfare requirements show that in the context of a world pandemic, organizations’ responses to NYDFS requirements of preparedness and financial risk management plans must encompass a worldwide view, or risk violating the regulator’s mandate. Legal counsel experienced in preparedness and financial risk plans, data security, and outsourcing can help ease the burden of compiling such a response.
If you have questions or would like further information, please contact Joshua A. Mooney (email@example.com; 215.864.6345) or Richard M. Borden (firstname.lastname@example.org; 212.631.4439).
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