A quick check-in from the Swissotel in Chicago, where we just wrapped up the main day of Bank Director’s 10th annual Bank Audit & Risk Committees Conference. This is a fascinating event, one focused on key accounting, risk and regulatory issues aligned with the information needs of a bank’s Chairman, CEO, Bank Audit Committee, Bank Risk Committee, CFO, CRO and internal auditor. Risk + strategy go hand in hand; today, we spent considerable time debating risk in the context of growing the bank.
Earlier today, while moderating a panel discussion, I referenced a KPMG report that suggests “good risk management and governance can be compared to the brakes of a car. The better the brakes, the faster the car can drive.” With anecdotes like this ringing in my head, allow me to share three key takeaways:
- A company’s culture & code of conduct are critical factors in creating an environment that encourages compliance with laws and regulations.
- Risk appetite is a widely accepted concept that remains difficult, in practice, to apply.
- As a member of the board, do not lose sight of the need to maintain your skepticism.
This year’s program brings together 150+ financial institutions and more then 300 attendees. The demographics reflect the audience we serve, so I thought to share three additional trends. Clearly, boards of directors are under pressure to evolve. Financial institutions need the right expertise and experience and benefit greatly when their directors have diverse backgrounds.
Further, as more regulatory rules are written, board members need to understand what they mean and how they can affect their bank’s business. Finally, technology strategies and risks are inextricably linked to corporate strategy; as such, the level of board engagement needs to increase.
Given the many issues — both known and unknown — a bank faces as our industry evolves, today made clear how challenging it can be for an audit or risk committee member to get comfortable addressing risk and issues. Staying compliant requires a solid defense and appreciation for what’s now. Staying competitive? This requires a sharper focus given near constant pressures to reduce costs while dealing with increasing competition and regulation.