Risk management held back by lack of clear definition
Risk managers must collectively define the value of their trade to be taken seriously, according to Andrew Smith, chief financial risk officer of UK bank HBOS.
He highlighted the lack of consensus, even among the risk professionals in attendance, as to whether risk was an art or a science. He argued that for risk managers to have their business taken seriously, a clear definition of risk management would need to emerge. He offered one: “A set of actions used to contribute towards the likelihood of achieving and surpassing planned objectives over a defined period of time.”
Smith’s talk also touched on the perception held by chief executives of risk management. He argued that for something to be considered important, it must be quantifiable. Only then could the value of savings be fully appreciated, and it is saving and making money that makes people listen.
Good risk management, he said, was a better strategy than increased customer volume. "There is nothing your competitors can do to reverse the effects of your risk strategy, while market share can be won back," he said. But Smith added that a company’s chief executive was likely to see things differently.
Smith concluded that chief executives act according to the advice they receive from those around them paid to influence their decisions. The profile of risk management would be raised, Smith said, when more people understood the advantages of developing their risk strategies and co-ordinated their pressure on chief executives to prioritise risk.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Running the numbers on Barr’s Basel III endgame revisions
Fed vice-chair’s plan to ease capital requirements for big banks still lacks critical details
Endgame manoeuvre: US banks put SLR reform back in spotlight
Plan to ease Basel III brings renewed focus to impact of leverage ratio on US Treasury market
More disclosure touted to temper pre-hedging ills
Transparency could help investors choose a dealer, but will they use the disclosures?
Regulators want to fix AT1s. Investors want restraint
Tweaking the instrument that regulators love to hate may be the only way to prevent its abolition
Fed’s Basel III rollback gives clearing units a capital break
Client-cleared trades will be exempt from CVA charges and G-Sib surcharge calculations, says Barr
DTCC ‘will prevail’ in UST clearing, says CME’s Duffy
CME boss says LCH-FMX cross-margining deal could face obstacles, and acknowledges difficulties at BrokerTec
The standoff over separate account margining
CFTC issues sixth extension of no-action relief as long-awaited final rule stalls
Banks fret over vendor contracts as Dora deadline looms
Thousands of vendor contracts will need repapering to comply with EU’s new digital resilience rules