Risk Management Practices

What Keeps Bank Board Directors Awake at Night

Mark Hughes, Chair of Board, Global Risk Institute

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What Keeps Board Directors Awake at Night


What keeps you awake at night?

Chief Risk Officers are constantly asked this question.  As the apparent “bearers of all crosses”, perhaps they should answer “everything”.  It is not just CROs, or their executive management teams, that should have trouble sleeping. With an ever-increasing focus on governance, boards of directors must focus on risks, traditional and emerging, that could impact the health and stability of their organizations.

 

  • Would Wells Fargo have been embroiled in a sales practices scandal if the board had paid more attention to conduct risk and its culture?
  • Would the Commonwealth Bank of Australia (CBA) have avoided its woes if their board paid more attention to anti-money laundering risk and audit reports that raised red flags?
  • Would Danske Bank have avoided the problems created by its Estonia branch if the board had paid more attention to how its control functions operated?

 

That stated, are boards now expected to manage their banks?  The clear answer is NO. As the Australian Royal Commission states: “Boards cannot, and must not, involve themselves in the day to day management of the corporation…. The task of the board is overall superintendence of the company… an integral part of that task is being able and willing to challenge management on key issues and doing that whenever necessary.”