Risk Practice
Finding and developing the best risk professionals
- Risk is an emerging profession.
- The Risk function needs to champion the management of risk to improve business performance and increase shareholder value.
- Individuals with the capability and commitment are out there,…although not always easy to find.
- The choreography required to effectively lead the function to deliver strategic benefit is frequently underestimated.
The views of senior people in the insurance sector exemplify this:
- “All I hear is Solvency II; it’s important but the role of CRO goes far wider than mere compliance.”
- “As the regulatory regime has been perceived as more important we’ve probably over-promoted people without the capability to take our approach to the next level.”
- “We’ve boosted the function with more and more consultants – however, body shopping is not the answer.”
- “We need people who understand risk and can authoritatively convey their concerns to the Board.”
Our Risk Practice has been created to provide a fresh approach to support our clients in acquiring and developing the talent that risk functions now require.
The Context:
The challenges of navigating through an ever complex risk management landscape are now well understood, given the turbulence of the last few years. However, determining what is really required from the risk management function and its leaders continues to be a perplexing conundrum for many management teams and non-executives Directors.
The systemic shocks continuing to confront the wider financial services industry and the challenge of introducing Solvency II within the insurance sector have prompted many of our clients to review what they really need from their non-executive Directors and the Risk function.
The emphasis placed in the new UK Corporate Governance Code upon risk appetite and tolerance for risk have added additional impetus to the task of identifying and developing the talent required to create enhanced shareholder value.
The challenge facing organisations
- The speed of change has led to tactical rather than strategic responses to risk management.
- Only gradually is an understanding of what is really required in terms of commitment and capability becoming clear.
- The bench strength required to tackle these needs has either been underestimated or yet to be developed.
- There is a market shortage of the individuals with the requisite skills and individuals have been moved in to risk teams as a quick fix.
And what of those who oversee the Risk function? More than ever Executives and Non-Executives need to understand that no matter how sophisticated the risk models they are presented with are, on a fundamental level they may subvert the need to actively challenge the assumptions upon which they are predicated.
A really good CRO is going to have to live with, and thrive on paradox, for instance being able to develop coherent models but to understand their many limitations – to the point where model output is just one part of much bigger picture - the more “sophisticated” the model, the less use it often is. Consequently the management of risk now requires individuals who:
- understand that, as the future is always different to the past, the data inputs for all models will always be flawed with regard to forecasting future outcomes,
- are prepared to counter “organisation think” which may be perceived as slowing things down, but also asking “are we taking enough risk?”
- are able to appropriately manage the demand for simple “one point” answers when the reality is a spectrum of outcomes,
- are self-aware and able to accept that the quality of whether she/he is doing a really good job is often only seen during a time of crisis, although it is the avoidance of such crises that is the key to the role.
