3 mins reading time
Silicon Valley Bank collapse: what lessons must be learned
The coronavirus pandemic has underscored just how important the risk department is for banks and other financial institutions. Still, it is not always easy to get everyone across different business functions to share the same risk priorities. This WiRC webinar chaired by founder Rupal Patel hear from Lauren Rieder, Head of Operational Risk Coverage, and Investment Management CRO at Morgan Stanley, Kelechi Onukogu, Head of Business Finance Risk and Controls for EMEA and APAC at Wells Fargo; and Puja Patel, Head of Financial Crime at Santander, discuss how risk professionals can better collaborate with their colleagues to improve outcomes and create a positive risk culture.
Here are three key takeaways from the webinar:
How to collaborate across functions
One of the major challenges that risk professionals face—whether you are a CRO or head of a market risk function—is access to information, says Rieder. “You’re always one level removed from what’s happening in the firm; good news travels really fast, bad news very slow,” she said. That means risk professionals need to regularly communicate with a broad network of sources across the firm. “Collaborating is really about having tentacles out there across the different areas within the business,” Rieder said. Partly that is to get a better understanding of what is going on and promote a shared sense of purpose. “To have effective collaboration, people across all lines of defense need to understand that we’re all marching towards the same objective…we’re all working towards the same purpose and that purpose is really to protect the organization… to make money and revenue” she said. When objectives are aligned, there is a much greater sense of collaboration, Rieder added.
Building relationships with the first line as a trusted advisor can help foster a more collaborative spirit, says Onukogu. Early engagement with the second line is crucial to achieving the same desired outcomes, as working closely with audit to improve control design effectiveness. “Many times, I have seen organizations not giving audit the respect they deserve,” Onukogu said.
Strategies to influence stakeholders across the business
Getting stakeholder buy-in across the business is another major challenge for risk professionals. One successful strategy for overcoming any resistance is to make people feel like they own the process rather than having it forced on them by risk officers, says Onukogu. “This is their risk profile, this is their risk assessment, they’re the ones with accountable executives who wear a senior manager regime hat that will go to jail if they don’t get this right,” he said. In addition, Onukogu talked about being a “trusted advisor” to enhance relationships by understanding the product offering and the risk profile and “demonstrating a duty of care.”
Outlining risk responsibilities clearly and empathetically can be a more effective tactic to influence stakeholders, says Santander’s Patel. “Whatever the risk element is if you can explain that to somebody in a very simple manner and make it relatable to them… then you can get them interested and engaged,” said Patel. Get them engaged, and they are more likely to pay attention. “If they listen, they will then absorb and digest what we’re trying to manage,” she said.
Risk officers can also use the threat of regulatory sanctions to encourage stakeholder buy-in, says Rieder. “In my former role at a bank, we had lots of regulatory issues, it was much easier to hang onto the regulatory flag and say if we don’t do this, they’ll shut us down, they’ll give us a fine”. she said.
However, whilst this may be an easier way to influence Rieder says “to connect and influence it’s more important to be relevant … think about what’s important to the business, … this is our strategy, these are revenue targets, this is the return on equity that we want to achieve. We are there to support that, but we also are continuously mining the horizon for what can go wrong, ….. that can derail the business initiative. The ability for us to articulate “what is the return versus what is the risk, is a question we continuously are asking ourselves…Bifurcating between the two of wearing a business hat on … is a big part of being able to effectively influence the business to be pragmatic.”
Promoting a positive risk culture
The first step to promoting a positive risk culture across an organization is ensuring it is embedded into everything the organization does. From recruitment and onboarding, to ensuring people understand it is ok to escalate problems if something doesn’t feel right. says Santander’s Patel. Rieder also mentioned that “Not escalating something is a career ending move.”
Onukogu says it comes down to the age-old debate about whether conduct drives culture or culture that drives conduct. “Over the years, organizations have been very focused on the conduct side of things and having the right controls in place,” he said. That has often allowed the wrong conduct and wrong culture to manifest, leading to greater risks as controls are seen in isolation as an exercise instead of a risk management tool. “Organizations have to invest a lot more in putting culture first because by doing that, they will absolutely get the right conduct from colleagues,” he added. Culture is a number one priority but “it’s a marathon not a sprint.”
Instilling a positive risk culture across an organization also requires more than just getting people to sign up to a list of values, says Rieder. “A culture is mimicking how others behave, so you see the CEO behave a certain way, his management team behave a certain way, and so echelon by echelon you learn how to behave,” she said. At Morgan Stanley when there is a promotion to Managing Director, they are called Partners to instill top down that individuals are all accountable. Additionally, they have added diversity and inclusion as a new value to drive a positive risk culture.
Risk professionals are trying to understand the value of collaboration and are actively looking for ways to encourage it within their teams. A collaborative spirit in a company makes the whole workforce more productive.
Watch the whole broadcast here.