Tim Gorst, Senior Manager at the NAB, tells us about the increasing focus on risk culture in financial services and how the effective professional contributes to a strong risk culture.
The 2015 introduction of CPS220 (Risk Management Prudential Standard) into APRA regulated entities has seen a much stronger focus by Boards on risk culture. Yet an October 2016 APRA update on the topic commented that most institutions still seem to be grappling with how to get risk culture embedded into the actions and behaviours of the people who work in these businesses. I believe that where effective professionals thrive, risk culture will be strong. So what do these people look like?
- They Know Their Business – They take time to look back and understand the events that have shaped where their business is at today, what can go wrong and what can be learnt. They look forward and think about how different scenarios might impact the business plan and purpose. They know their customers, and understand how risk, return and capital all need to hang together to deliver in the long term.
- They Collaborate –They have learnt that they will get better outcomes when they work with others around a common purpose, than when they work alone. They welcome review and challenge, and respect those whose role it is to provide this.
- They Take Accountability – They know how their role fits in, where their responsibility starts and ends, and when to defer to others. They are bold, but also know when to pull back and show restraint.
- They Lead With Integrity – They influence by being an example and are disciplined to stick to the process particularly in times of stress. They know that work and life must be in balance to sustain their personal effectiveness. They understand that community trust is the foundation of the effective working of the financial services industry, and do their job with integrity.
What the financial services industry needs, and the community demands, is a renaissance of the effective professional. So what can Boards and executives do? They can train their staff to be more effective professionals, ensure incentives reward and promote the effective professional, provide leadership (tone from the top) role modelling the effective professional, ensure only effective professionals are recruited (and “ineffective unprofessionals” managed out) and establish a purpose and plan that is both customer and people focussed.
In my work in financial services, I meet so many effective professionals every day. Right now the industry just needs more of them, and in positions of leadership. So let’s bring on this renaissance of the effective professional, and the bright future of an industry where risk culture, community trust and confidence is strong.
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