My role as a Chief Risk Officer is to develop the Risk Framework for Jupiter. My outlook towards Risk Management can be summarised into three sections.
1. Risk management is a culture and not just a set of rules.
Risk Management is not a stand-alone function. Uncertainty lies in every aspect of the business. A Financial institution ( for that matter any organisation) has numerous processes, and each process often has an observable end-state. Risk management must measure these at a granular level to develop controls but also aggregate them.
Total Risk, an organisation, faces is much more substantial than the sum of Risk observed across all its processes. I think Risk Management is a culture and not just a rule-based Strategy.
2. Risk Management needs to look at customer outcomes.
Risk management over time has evolved; it is a lot more data-driven, and excellent practices of process mapping have been adapted; however, I think Risk Management only works if everyone in the Organisation participates. Risk ‘thinking’ must become a seamless way to develop product and customer service. Risk management over the years has broadened its goal. The ‘old’ school was to look internally and tighten the process and develop a control framework that reduces the Risk of the Organisation. It occasionally missed a key objective which is “customer outcome”.
The New Risk Framework looks to focus on the customer and measure Risk by linking it to customer outcomes.
3. Protect customers & Organisation across business cycles.
Affordability ( Can the customer afford the loan ? ) and Sustainability ( Can the customer pay the loan over the life of the loan ) is becoming critical parameters in defining the Risk Framework. The frequent collapse of the financial system has made risk management professionals think of a longer horizon for their framework.
Risk management must be though the cycle for it is critical that it protects the customers and organisations when business cycles are not favourable.
I will reach out to the community to improve how Risk can look at customer outcomes. In the meantime, what do you think I spend the most time as a CRO these days? Tell me in the replies below
See you soon. On a lighter note-
Beatles song on what we can avoid !!
Organisations singing to the Risk management team in times of trouble