Updated: Dec 4, 2019
Tribus have been attending the RiskMinds conference in Amsterdam this week. The first day focuses on the CRO inbox. Here are our key takeaways from the day:
Vendor risk management challenges
Are our outsourcers (to the nth level) compliant?
What are their single points of failure?
How do we monitor continuously?
Reputational risk - still requires work
Does tone at the top really permeate through to the rest of the organisation?
“If you have to rely on regulation you have failed somewhere”
Accountability for risk will only increase in 2020
Disruption and horizon scanning - not there yet
If you think you have it covered you’re most likely complacent
2/3 of delegates’ firms do not have sufficient predictive analytics for horizon scanning
Economy - uncertainty and pessimism
Are banks safe? “Yes…..if you believe the models”
Populism and nationalism here to stay unless/until growth in excess of 2% - will require some hard choices on economic and social reform, especially in Europe
Brexit – Need deal, quickly, with Angloshpere to make it worthwhile
Resilience in a world of volatility
Unexpectedly high LGDs will be a big issue, especially in shadow banking
Non-bank lenders holding large NPL portfolios will behave differently to the banks in a downturn – but with what level of contagion?
Many fintechs vulnerable to a downturn – as with dot-com crash could be some bargains to be had
Still too many Zombie firms with high leverage – won’t survive another downturn
Most traditional lenders need to structurally reorganised whilst cutting costs - how to meet long term vision of a sustainable business model with short term financial demands…?
Are cost of capital return hurdles too high in a world of negative interest rates?
Have a playbook of actions to take in event of downturn that is triggered by KRIs (failure to plan=plan to fail)
Hold on to capital in downturn to make most of opportunities a crisis presents
Spend as much effort and resources on profitability as on capital ad liquidity
Climate Change - must do better....much much better
Climate risk is not just the physical – but permeates every aspect of risk – policy, legal, technology, reputational, financial
Can’t solve it without China
Nobody believes the corporate “blah-blah” – leaders need to have a view and to embody that through personal action
Need to double to treble our rate of decarbonisation to stand a chance of making a real difference
Stop being incremental in approach – true innovation and creativity comes by attempting to make 90% change not 0.9%
How do we return to profitability?
The risk function has a wealth of data and tools to provide real help to customers. Used in conjunction with appropriate data compliance, it can make a real difference to clients as it did for Nationwide (https://www.nationwide.co.uk/support/travel/important-travel-information). Good customer experiences create loyalty and advocacy.....and new business.
Use your own product and learn from it
Embed compliance and financial crime specialists into the new product development teams
Think beyond traditional bank services – if you only continue to provide these you’re dead. Look to broaden out across the value chain that data and analytics provide