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As communication consultants in financial services, we’ve traditionally dealt with Corporate Affairs and Heads of Marketing or Comms. Increasingly however, communication has become a power tool in both the individual and the organisational armoury. A strong communication strategy, along with the skills to execute it, offers both protection from external threat and boosts internal engagement. For that reason, communication and influencing skills are increasingly finding their place on the Chief Risk Officer’s (CRO’s) competency list. Here we take a look at what that means for the CRO.
Last week BlueChip attended an AB+F hosted lunch where the topic for discussion was, ‘The Strategic CRO: Custodian and Navigator’. There, we observed three clear areas of attention emerge from discussion about the changing role of the CRO among panel members from Macquarie Group, Bank of Queensland (BOQ), ING Direct and HSBC Bank Australia. Those areas included the need for CROs to add value; the impact of a current low growth environment; and the importance of measurement.
1. How does the CRO add value to an organisation?
While some financial service organisations have well established risk officer roles, for many, it's a relatively new function. Either way, all panel members agreed that the CRO now has a seat at the executive table, dealing directly with either the CEO or the Board. This is a role that goes well beyond operations: it’s also now regulated and mandatory in financial services.
Stephen Allen, Head of Risk Management for Macquarie Group encapsulated the importance of the CRO in this sector: “Financial services institutions have to take risks every day – and get paid for it. The role of the CRO is to manage that risk”.
For this reason, for CROs, uncovering the information needed to effectively manage risk and thus demonstrate value is crucial. And it’s not necessarily analytics that reveals this information. It’s often the social, ‘water cooler’ conversations that provide it. Bank of Queensland’s Peter Deans confirmed that nothing beats meeting people on the frontline to ‘kick the tyres’, uncovering events and information that may be highly useful to the average CRO but might well otherwise go unreported.
2. What does a low growth environment mean for a CRO?
For a global bank like HSBC, Charlotte Middleton cautions that in a client-scarce market, her people must ask why a new customer is being offloaded by a competitor. Is there something about that customer that poses a risk? And if so, what is its likely impact on HSBC's business?
In the retail banking sector, as described by Peter Deans of BOQ, there’s a greater appetite for risk. He believes this has increased over the last year, largely based on better use of reporting and analytics. Retail banks have once again earned the licence to focus on personal finance, he says. In real terms, this means more loans and credit cards issued from branches, ultimately acting on a directive that is set from the top.
Macquarie’s Stephen Allen gave a refreshing perspective on the low growth situation, reminding the audience that “there is lunacy in high growth environments,” using an outlandish - but genuine - example from the dot com boom.
3. What is important to measure?
Monitoring triggers should be a business-as-usual undertaking within the risk team. But engaging employees in other divisions calls for investing in a reporting and stress testing system that’s accessible business-wide. This significantly helps align employees with the CRO’s vision, says Macquarie’s Allen.
Bart Hellemans notes “It’s not what you measure; it’s what you do with it that counts.”
And this is where solid work in communication needs to happen, agreed the panel, because most people within an organisation don't understand risk. It’s a hard concept to make interesting, commented Middleton, quipping that she’d been pulled off an internal presentation about her function because it was deemed ‘too dry’!
The bottom line?
Risk officers and their teams need to measure the things that matter to the people they work with every day, and speak a language that can be understood by their colleagues. If not, they risk losing connection with the people they deal with. This emphasises how closely the real and perceived value of a CRO is linked to the quality of his or her reporting – a.k.a. communication. Risk professionals will not be able to demonstrate their value if they’re unable to effectively communicate with key stakeholders. It seems the CRO’s job description continues to expand, with frank and fearless communication increasingly necessary, regardless of market conditions.
