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. Where effective professionals thrive, risk culture will be strong. So what do these people look like?
1. 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 understand how risk, return and capital all need to hang together to be sustainable in the long term.
2. 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.
3. They Take Accountability – They know how their role fits in, how their role serves customers, 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.
4. 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.
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.
What the financial services industry needs, and the community demands, is a renaissance of the effective professional. And what is the foundation of the effective professional? It is to lead with integrity, which is why I believe the BFO is important. Taking the BFO provides both a way and support for those working in financial services wanting to step up to this responsibility, helping to navigate those professional “grey areas” where it is not immediately clear the right thing to do. 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.
Tim Gorst is an experienced Australian financial services professional working for over 20 years in a variety of banking and finance roles. Tim is passionate about using his own practical experience to lead, train and coach others to be the most effective professional they can be, both for their own success, and the success of the organisations and communities they serve. Tim is a Fellow of the Institute of Actuaries of Australia, a Chartered Enterprise Risk Actuary, and a BFO signatory