“Sense and deal with problems in their smallest state, before they grow bigger and become fatal.”
Hurray, another year is with us again. Whatever we do in life, once it does not kill us makes us stronger. I am sure some of you will be saying to yourselves, ”There she goes again, reminding us about risks, errors, mistakes, fraud, losses and all the negative sides of banking…the wet blanket, that devil’s advocate, etc.”
Some business owners think risk management is not important just because they are small, but in many ways risk management can be more important for a smaller business. Small businesses have fewer resources to help absorb a risk than larger businesses—one substantial event could take down a small business that isn’t prepared. If you haven’t given risk management any serious consideration, it’s still early enough in the year to re-evaluate your business and its susceptibility to risk.
Reflections from 2017
Let me ask a few questions about what possibly happened in your institution or your industry last year:
- Was there a particular Teller who was recording constant cash shortages/surpluses?
- Did an employee abscond with customers’ funds because of lacking supervision and monitoring?
- Were your CCTV cameras just white elephants in the branches? Were they used pro-actively or just referred to after incidents had occurred?
- Did you observe some hardworking employees who never wanted to go on leave? Give them a break, otherwise it can be a recipe for disaster!
- Was a staff overly-friendly with a particular customer and did not want anybody else to handle that customer’s transactions? Money launderers are busy trying to make their laundered funds look legitimate.
- Is the ratio of outsourced to regular staff highly skewed toward them?
- Was there a high attrition rate in your organisation? Did many good hands leave the organisation to join your competitors?
- Are there factions in your department/branch causing lack of teamwork?
- Were there proper follow-ups on loan documentations, account opening and customers’ businesses?
- Are incidents reported too late to management?
- Are subordinates afraid to talk? Do they just sit quietly waiting for the leader to finish?
- Do you know the lifestyles/personality of the staff in your unit? How do they fit into the roles they are playing?
The list for reflections is endless. It is just to set you thinking. Although many people do not want to be reminded about risk, it is a topic that cannot be wished under the carpet because it covers every area. However, if risks are not also undertaken, business cannot move on. After all, scientific discoveries were made through risk-taking. The most important thing is the lessons we learn and share from the experiences.
Let us look at few random reminders for managers to mitigate operational risk in 2018 and beyond:
- Institute a Structured Risk Management Plan
Since human capital is the foundation of risk management, why don’t you ensure all job descriptions for staff embed a risk management section? This can include clear, simple and measurable goals that staff can align with to establish a risk-culture in the bank.
Too many staff blame their management with the usual complaint: “I did not know. It is not part of my job description”. If the staff want to see everything in black and white, just give it to them and let it be a useful reference. Managing risk is everybody’s business. No more blame-games…try it and see.
- Business Leaders…Know Your Business!
Over-specialisation can sometimes be risky. Business leaders require appreciation of most functions in the bank to be more strategic in their thinking and decision-making. Silo-management of risk is dangerous and leads to unhealthy competition. It would be good to see business leaders meet regularly to strengthen their knowledge of each other’s functions and agree on risk factors to watch out for…try it and see.
- Regular Communication
Regular communication is king when it comes to risk management! Many staff easily fall prey to risk by ignoring the little things that matter in their activities; therefore, regular reminders, sharing lessons learnt, help reduce risk in the bank. Misunderstood or incomplete information spreads ambiguity and invariably affects execution of the bank’s plans. This often creates problems between teams and employees. Accurate communication has to be established and one-on-one communication has to be promoted between different teams…try it and see
- Managers…Engage your Employees
On this note, I will take a direct quote from an article posted in the ‘Operational Risk Management’ by Brian Barnier.
“Don’t make the mistake of believing that a dictatorial management and an unquestioning workforce make for an ideal workplace. Instead, it is necessary to have frequent two-way interactions with your employees. Sometimes risks occur simply because they are not addressed by anyone. Employees are the direct links to business operations. Basically, they make the work happen and are the first ones to realise if something goes wrong or can be executed in a better way. So, give your employees ample space to openly address issues and freely state their suggestions.”
- Business and Technology MUST depend on each other
Without technology, the business of banking cannot thrive. Look at the Internet banking, online e-banking and all that the ‘fintechs’ are offering. Increased interdependency encourages a more integrated, performance-focused approach to IT-related operational risk management. Cross-disciplinary knowledge enhances understanding, and the IT leaders learn more about “what the business wants”.
Since all new banking products depend on IT, can you focus your product development on better-understanding of business dependencies on IT, while IT leaders also get an opportunity to see “through the eyes of the business”…try it and see.
- Risk is not Stagnant – Be Open to Innovative Approaches
Since banking is not static, Risk Managers should get outside the box and think more like Salespersons, while Salespersons should also think risk to make their goals more realistic. Increased understanding will enhance collaboration in product development for financial solutions for customers. Tap into the full range of innovative strategies for mitigating and managing risk. Can you take a closer look at your customers’ financial needs, resources and goals to determine the appropriate mix of products needed to accomplish their financial objectives? Try it and see.
- Be on the Watch-out for Cyber Threats
Although Internet banking benefits a bank greatly, it also brings new risks to both banks and customers. However, in our part of the world, what is the literate population? Holding a mobile phone does not make a customer literate, and banks must separate the wheat from the chaff, while regular updates and security tips should be given to bank customers to avoid ‘phishing’ and hacking by cyber criminals. Let your customers know you care.
- More Risk-based Audits
Can banks embrace a transformational shift toward a more risk-based approach to audits? Although they report directly to the board, there should be a more inclusive role for auditors during product developments, operational manual updates and strategic decision-making. They have a ‘third-eye’, and that eye should be taken notice of. We must not wait for events to happen before we ask them to investigate. They should also be proactive and come out of their shell so they will be regarded not as mere policemen but also partners to prevent losses…try it and see.
- Being Realistic
Set a Schedule. No goal is attainable without deciding when you’re going to make the small changes needed to reach that goal. If you set no schedule for yourself, or – as most people do – set an unrealistic schedule, you are setting yourself up to fail. The schedule should be written down, just like your goal, and the steps you will take to reach each goal.
Improving your risk management programme over the entire year is realistic; trying to do so overnight is impossible. If your schedule involves things which need to be done daily or weekly, set specific times of the day or specific days of the week you will use to work on it. Then do it, and keep written-track of your sticking to that schedule. If you find a part of your schedule isn’t working, don’t be afraid to change it. The key is to stay flexible and adapt to changes needed to be successful in your goals.
- Don’t Be Upset by Setbacks
You may have heard the old adage “two steps forward, one step back”. This is often true for New Year’s Resolutions, which can often be the most difficult to keep. It may help, though, to remember that we’re all human. We all make mistakes; we should not be disillusioned by setbacks in trying to reach your goals. In fact, if you know ahead of time that there are going to be times in which your resolve weakens, or you don’t live up to a certain step or schedule you’ve set, it can help when it does happen. It’s a part of the process and means nothing more than a temporary setback. Putting such temporary setbacks into their proper perspective can help you move beyond them, and put them behind you.
Moving into a Brighter Future
I sincerely wish you well in the New Year and beyond with the following key words:
- Staying focused among trials and tribulations
- Not being stagnant in ideas and thoughts
- Regularly communicating with staff and management, as well as with customers
- Enjoying the ‘Financial Marriage’ relationship with customers = the keys to excellent service delivery.
Keeping these few simple tips in mind this New Year may help to increase your chances of success. Consider that the New Year is not only a time to make changes in your life, but also a time to see your past successes! On this note, I wish you a happy new year with risks properly managed, assets efficiently utilised, your deposit mix properly profit-worthy, and your staff more bubbly and loving toward customers so as to offer a better ‘financial marriage’ with them. Amen to that.
ABOUT THE AUTHOR
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She uses her experience and practical case-studies for training young bankers in operational risk management, sales, customer service, banking operations and fraud.