Financial giants caught up in India’s brutal pandemic wave

About 13,000 kilometres east of Wall Street, on a stretch of Bangalore’s Outer Ring Road, sits what was once the heart of the global financial industry’s back office.

Before the pandemic, this cluster of glass-and-steel towers housed thousands of employees at firms like Goldman Sachs and UBS who played critical roles in everything from risk management to customer service and compliance.

As many as 25 per cent of employees in some of UBS’s teams in India are absent.Credit:Bloomberg

Now the buildings are eerily empty. And with case counts soaring across Bangalore and much of India, work-from-home arrangements that have sustained Wall Street’s back-office operations for months are coming under intense strain. A growing number of employees are either sick or scrambling to find critical medical supplies such as oxygen for relatives or friends.

Standard Chartered said last week that about 800 of its 20,000 staffers in India were infected. As many as 25 per cent of employees in some teams at UBS are absent, said an executive at the firm who spoke on condition of anonymity for fear of losing his job. At Wells Fargo & Co.’s offices in Bangalore and Hyderabad, work on co-branded cards, balance transfers and reward programs is running behind schedule, an executive said.

While banks have so far avoided major disruptions by shifting tasks to other offshore hubs, India’s Covid crisis has exposed a little-discussed vulnerability for companies that have spent decades outsourcing functions to the country. India’s outbreak is intensifying even as vaccinations fuel economic recoveries in other parts of the world, heightening fears of a back-office bottleneck at a time when Wall Street firms have rarely been busier.

“This is not a local, India-only problem, this is a global crisis,” said D.D. Mishra, senior director analyst at researcher Gartner. The current wave will be “significantly bigger” and organisations with India-based staff “will need to take action to plan for and mitigate if needed,” Mishra and his colleagues wrote in a note last week.

Nasscom, the key lobby group for India’s $US194 billion ($249 billion) outsourcing industry and its almost 5 million employees, has downplayed the threat to operations. But Mishra and fellow analysts at Gartner say they’re fielding a daily flood of calls from anxious global clients asking about the COVID-19 situation.

India’s total coronavirus infections have exceeded 21 million, of which about 7 million were added since mid-April. The state of Karnataka, whose capital is Bangalore, reported more than 50,000 new infections for the latest 24-hour period for the first time, almost half of them in the city.

Experts have warned the crisis has the potential to worsen in the coming weeks, with one model predicting as many as 1,018,879 deaths by the end of July, quadrupling from the current official count of 230,168. A model prepared by government advisers suggests the wave could peak in the coming days, but the group’s projections have been changing and were wrong last month.

In Bangalore, Delhi and Mumbai, the three main bases for the financial giants’ operations, infection rates have reached such alarming levels that local governments have ordered stringent restrictions on movement.

A number of global banks have offshore hubs in India. Credit:Bloomberg

Similarly, thousands of Goldman employees are working from home, doing high-end business tasks such as risk modelling, accounting compliance and app building. A representative for the bank said workflows can be absorbed by the wider team if needed and there’s been no material impact so far.

Citigroup said there’s currently no significant disruption, while Deutsche Bank AG said employees were working seamlessly from home. Morgan Stanley and JPMorgan Chase & Co. detailed relief efforts they are undertaking, but didn’t elaborate on the impact on their operations. Last week, HSBC chief Noel Quinn said he’s “watching it closely” and ruled out any material impact at this stage.

Besides worrying about disruptions to operations, employee well-being and securing medical help are also taking up a lot of management bandwidth at every large outsourcing unit.

At a recent all-hands, virtual corporate strategy team meeting at Accenture, for instance, the talk wasn’t about the usual pay raises or promotions. Instead, worker after worker demanded flexibility, reduced workloads and no-meeting Fridays, an executive said, asking not to be named discussing internal company matter.

Their size has become a hindrance, one executive said, but it’s not clear where else they can go for talent and scale, he added.

“We are telling clients they need to relax service levels and reduce expectations for the coming few weeks,” said Mishra, the Gartner analyst. “This not a normal situation.”

Bloomberg

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