Balance Sheet

Getting risk managers to the top table

Adrian Belton,
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Getting risk managers
to the top table
Several of the articles in this issue are devoted to business risk and how to
control and model it. Adrian Belton looks at this issue from a slightly different
angle. He steps back from the theoretical application of risk management techniques,
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and asks how risk managers can improve both their style and methods
RE YOU a risk manager?
A Worried about
management? Do you wish
getting
enough of your organisation’s
top table attention on risk
you were actually on the top table? If
answers to more than one of these ques-
tions are ‘yes’ then read on. In this article,
I set out some perspectives based on my
own experiences as director of opera-
tional risk for the Barclays Group.
First, a little bit about what I mean
by ‘top table’. For me it means the
board, and its principal committees of
non-executive directors such as the
Audit Committee and Risk Committee.
Other relevant top tables are the
Executive Committees of the group and
the principal businesses of which it is
comprised. Risk management is not
exactly new, but for many top tables it
has not perhaps been the formal
discipline it is now becoming.
What is now making risk manage-
ment a topic of real and growing interest
to the top table? There are at least four
main drivers, all related but sufficiently
distinct to discuss separately.
First of all, directors are increasingly
concerned with matters of good corpo-
Organisations that are clinging to a
culture epitomised by layer upon layer
of checks and controls may be in dan-
ger of losing competitive ground
rate governance. The latest proposals
from the Turnbull Committee certainly
broaden their sphere of interest from
just financial risk to all risk. My own
industry is also under increasing scrutiny
from the regulatory quarter on the risk
management front, further heightening
the top table’s concern that risk is being
appropriately governed across the
organisation.
Second, top tables are increasingly
using a broader ‘balanced scorecard’ by
which to manage the organisation.
Customers, staff, and business efficiency
are all important components, in
addition to the more familiar financial
scorecard. Understanding and managing
risk well is vital if all the scores on the
card are going to move in the right direc-
tion. That is not to say that risk needs to
be a separate score. However, the top
table is interested in how the right
culture – a ‘risk aware’ culture – can
improve overall business performance.
By contrast, those organisations that are
clinging to a culture epitomised by layer
upon layer of checks and controls, and
checkers checking the checkers, may be
in danger of losing competitive ground
through needless cost, and stifled
STRATEGY
productivity from employees who live in
fear of blame.
The third reason for risk manage-
ment earning its place at the top table is
to help inform the top table debates on
capital allocation. An understanding of
overall risk profiles is vital when
considering investment or divestment
opportunities, and who better to advise
than the risk manager. Capital is, of
course, one of the main buffers for
unexpected loss and while the top table
may not want to be battling with sci-
ence, it is certainly eager to gain a more
tangible understanding of the risk issues.
Finally, I am sensing a growing top
table interest in ‘new’ areas of risk. The
rate of technological exploitation in all
areas of the business is giving rise to new
risk concentrations, for example in the
creation of large, single-site call
centres. Similarly, as we all enter the e-
something world, all sorts of interesting
and new perspectives on risk emerge.
Organisations are no longer fortresslike;
we are all becoming interconnected via
the Internet, bringing attendant risks.
Outsourcing, co-sourcing, and now
smartsourcing are all challenging the
internal view of risk – organisations
might outsource the operations, but I
contend that, for an organisation with a
valuable brand, outsourcing the risk is
not quite so straightforward!
If these are the issues exercising the
top table, what can risk management do
to claim its place at the top table? There
are three obvious things to consider,
which are simple to suggest but, in a
VOL 8 NO 1 | BALANCE SHEET | 33
 STRATEGY
large organisation, might represent
something of a challenge.
The first is for risk management to
organise itself to provide a total or inte-
grated (even holistic) view of risk to the
top table. In Barclays we are achieving
this by grouping all the risk management
functions under a single risk director
(see Figure 1). Risk management’s focus
also has to be kept clear. I will concen-
trate on just three broad responsibilities.
The obvious (and thankless) task is
to ensure that there is no material unex-
pected loss. Top tables do not like
surprises, but they are more likely to be
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tolerant of occasional losses if the scale
and nature of the risks are presented to
them in good time. Sad to say, top tables
often learn about risk after it has mate-
rialised, and the head of Internal Audit
is called to explain the breakdown.
Perhaps a risk manager ought to have
been there earlier to ensure the top table
was aware of, and understood, the risk
it was carrying before this materialised.
A more motivating responsibility is
that of promoting risk management as
an enabling function, there to create
value. This could mean helping to create
products which are perceived by cus-
tomers as safer, more reliable and secure
than those of competitors. For staff, it
could mean creating a safer, simpler
working environment, so that they do
not live in constant fear of breaking
rules and, rather, can be liberated to
concentrate on serving the customer in a
risk-aware manner. For shareholders,
risk management can help create value
by understanding what needs to be done
to protect or enhance earning streams
and capital value.
The third responsibility is that of
developing people. Risk management, to
get to the top table, needs to invest in the
people who become the leaders of
tomorrow. Too often I sense people
have ‘ended up’ in risk management and
that there is a fighting in the trenches
between risk managers and line man-
agers. Risk management will need more
people who can develop a general’s per-
spective, and can help to plot the win-
ning strategies, rather than being stuck
in face-to-face combat.
Back to what risk management needs
to do. The third feature to get right is
34 | BALANCE SHEET | VOL 8 NO 1
Risk management structure in the Barclays group
Figure 1
that of the reporting level. Unless risk
management is engaged at the board
level and key committee levels, then I
doubt if it can truly consider itself at the
top table. Easier said than done perhaps,
but in reality I detect a strong desire
from the top table to receive meaningful
reports on risk; ones which promote
understanding and debate, and can evi-
dence the state of corporate governance
on risk matters.
If that is what is needed, what does
this require of risk management? In
short, a fresh perspective illustrated by
examining the skills, knowledge, vision,
and behaviour required of risk
managers. If today risk management is
characterised by complex analytics,
lots of tools and techniques, a strong
internal focus, and a protective attitude
(ie, risk managers are seen as blockers),
then for tomorrow, to impress the top
table and to earn a place at the table, I
suggest that risk management will
need to demonstrate much more
persuasive communication and
presentation skills, a broader knowledge
of the business and its external environ-
ment, a more visionary, forward-
looking stance, and a more proactive,
‘enabling’ attitude (ie, risk managers are
seen as being there to help make good
things happen).
Which brings me to what the
risk manager, striving to command
their place at the top table, requires.
Ask yourself the following questions.
When was the last time you
critically reviewed your CV for the
requisite balance or blend of experiences
to get you to the top table? How much
exposure have you had to the top table,
and how do they perceive you as an
individual? Consider next your responsi-
bilities. Are you simply being a
‘backstop’, someone people only
consult if they think something
might go wrong? Or are you setting out
your stall, and are seen as such, to create
value?
In short, are you exhibiting
leadership traits and an ambition to take
on a leadership mantle? Finally, how
would you describe your own personal
career in risk management? To get on,
and command the attention of the top
table, it will be necessary to put your
head above the parapet and expect to
get shot at. But then as a good risk
manager, you should know all about
which risks to take when they affect you
personally.
For those who aspire to the top
table, I urge you to seize the opportuni-
ty and draw courage to take up the
challenge. ■
Readers who would like copies of
summaries of this and other papers
given at the Institute of Risk
Management should call Richard
Brookes on +44 (0)1702 482 240.
Adrian Belton is director,
group operational risk,
with Barclays Bank.