Movies are insightful. Films like Wall Street make me smile when an appropriate line fits a moment of thought. While not being a fan of the 1987 film Wall Street for many reasons, the film, like The Godfather has many one-liners and truisms. There is a scene in the film when a young, naïve, ambitious Bud Fox asks Gordon Gekko for another chance to work with him. Bud failed miserably after his first attempt. Gekko says to Bud: “You want another chance? Then you stop sending me information and start getting me some”
The line is short, it says a lot. Work hard, dig for strategic information, don’t rely on what others are telling you, verify, translate, find opportunities, collaborate, locate weaknesses, locate problems, act, have no fear. After my attendance and company’s sponsorship at GCOR XIII, RMA (Risk Management Association) conference in Cambridge Massachusetts in early April. This movie line and my interpretation of it gave clarity to what transpired at the event.
Practitioners helping practitioners. People that care about the evolution of risk management as a practice and profession. Those that are passionate about discipline and progression. Culture, conduct, trust, reputation, and ethics were underliers and came across in every keynote, panel and subject-specific session I attended. People were concerned with getting pertinent risk information. Risk information that offers the greatest opportunities and the greatest disasters that the banking industry faces, presently and going forward.
To the point of Gekko’s one-liner. Boards of Directors must demand, am I getting the correct data summary in a timely manner from the enterprise risk team to execute my responsibilities most effectively? If I have the correct information, can I drill down to obtain the correct summary results for me to execute my oversight responsibilities?
Risk people across the entire banking industry must ask themselves, Am I getting to the Board the correct information for them to utilize their unique expertise and to drive earnings? Am I sending the correct information summary or am I sending data to check my box?
Two simple questions right? Wrong! The reality is these questions are distorted and buried in a voluminous, confusing, poorly understood web of dissimilar data outputs that lack alignment and clarity throughout the banking industry. Every Board member, every executive, and every risk practitioner must address this. They must uplift the risk culture for every team member in bank and risk reporting programs. We must move the industry forward. This is a ticking time bomb, and this is your wake up call.
Serious consequences, serious institutional loss of value. You bet they are! The answer lies within your peers and your fellow practitioners working collaboratively to address these key systemic problems. These peers were speakers at the conference. Which included CEO’s, Board members, Chief Risk Officers, Chief Operational Risk Officers, Heads of Audit and Technology experts working on behalf of our country’s national security and intelligence. They represented the key thought leadership in our banking industry. Their discussions were direct, fearless and to the heart of each matter they presented, yet the gaps still exist.
One of the biggest risks to the banking industry is you, your mindset and how you build a culture in every decision by your actions. For the past 15 years, the old boys network dominates, Fixed mindsets dominating business units, management, and Board rooms. Lack of collaboration, sharing risk from janitor to Boardroom. In today’s competitive environment, everyone has a role. Without it, earnings cannot grow effectively.
I attended this conference for the same reason I attend conferences. To grow, learn and serve other professional practitioners. Sharing key takeaways from subject matter experts and their experience. Now and going forward collaborative growth mindsets must prevail. Collaborative growth mindsets say I can do anything, I can do better.
People Risk is the number one risk. Firms are debilitated when there is not a culture supportive of taking risk. Thinking outside of the box rather than checking a box and going home. It hurts every firm where it exists. Inertia, lack of will, fear to speak and act are the normal course of action because there is no accountability in understanding risk and how it impacts the organization and their role. Positively and negatively. There is a lack of risk leadership and action. This conduct is detrimental and disastrous. Instead, try to understand the rapidly changing world. Throw out your current thoughts, what you know, what you do. Park your thoughts and come up with new ones (stop sending, start getting) We hear this kind of talk everywhere we go, it has become meaningless but ignoring hard truths leads to defunct company culture and suffering from the Top to the Bottom of the Firm.
Alright. So, what do we do?
Many CRO’s across the industry powerless and deemed irrelevant in the success of the organization. They are a cost or compliance function, a necessary evil due to regulatory pressures and fines. This is due to the amount of time and money spent compiling and sending information that is not deemed understandable or useful. Harsh fact? You bet it is! This reality must cease to exist for the bank industry to survive and prosper. Three things must happen in risk. Strategy, capability, and commitment to leadership action.
Leaderships new call to action and risk culture will help today’s banks growth crystalize a clear vision and direction, ultimately steer a course for sustainable growth. Every employee must live and act, using the correct meaning of risk appetite and risk tolerance. Use the correct vision to align the culture, strategy, and appetite. And we hope to get a bigger bonus as a result of these actions. We protect the firm and optimize its measured performance.
Financial industry communication is a nightmare. Many stakeholders, at the top of the house and in business units have different opinions and priorities about everything and are paid differently by different risk frameworks. It is difficult at best to communicate subject-specific jargon. Hard to communicate business language and silo language. Presently, it is a hellish effort and not effective. How do we put the banks vital business process points into language that everyone from top to bottom can understand and work with?
Let’s face it, there are too many things to manage. The only way to do it is to have a common data set that acts as a land bridge leveling the field of communication, accountability, and actions. There is no other way to know where cracks and opportunities await you.
People know where the cracks and opportunities are, but they don’t get paid for them and they are not responsible for monitoring them. Fear of failure, fear of taking risk is not rewarded. Thinking outside of the box is not rewarded. To succeed you must fail or at least take a few bruises.
Presently, culture, conduct, and people are disparate. It is human nature and a corporate norm. However, we are going to channel that nature and norm to the maximum benefit of banks, their clients, their working practitioners, executives, Board members and Wall Street with record earnings due to a change in risk culture and conduct.
We are deeply committed to helping our fellow practitioners improve cultures in their institutions and would like to share our learning experiences of this conference to all.
Here is my contact information. I would love to learn how your organization is addressing these matters.
Managing Director – Education / Strategic Partners
Strategic Risk Associates
About the Author and Strategic Risk Associates:
Marc Caccavale is a twenty-year financial industry practitioner. He has intimately worked for the most successful industry service providers. Through multi-decade interactions with firms of all disciplines, Marc has compiled an extensive library of direct source information essential for industry best practices in risk data aggregation and quality, risk data and regulatory compliance, ERM best practices. Marc met Michael Glotz, founder and CEO of Strategic Risk Associates while writing an article at a risk conference in New York City three and a half years ago.
Michael Glotz is a 35-year bank professional and is regarded by peers as a top expert on management and board risk executive requirements and functions in the bank industry. His firm Strategic Risk Associates is comprised of leading bank practitioners and former regulators.