The views and opinions expressed in this article are those of the thought leader and not those of CeFPro.
By Wolfgang Koehler, CRO, Member of the Management Board, Mizuho
How does a CRO’s role adapt to analysing risk landscape in light of a pandemic?
Part of the CROs role is to actually adapt constantly, be it to changing market environments or new products. This is part of the role which keeps it extremely attractive, especially in a dynamic environment like investment banking. However, Covid 19 certainly has added a new perspective to this. The pandemic was for a long time one of those operational risk scenarios most OR officers had difficulties getting buy in and agreeing – in hindsight – sufficiently severe impacts. So taking past experience into account one should never believe not to ever see a black swan!
In your opinion, what are best practices to consider when coping with risk in an evolving climate where financial volatility is heightened?
Without any doubt monitoring all parameters of the markets your company operates in is of utmost importance. However, equally important is to spend sufficient time on deliberating on what consequences these changes might have for your business and then to also follow through with advice to the business, applying changes to limits and potentially curtailing certain business activities.
How do you see the risk landscape changing as a result of the COVID-19 pandemic?
Due to the uncertainty when the pandemic will ultimately end further uncertainty has been injected into markets which were already impacted by a range of geopolitical challenges: Ongoing friction between the US and China, a generally more introvert role of the US creating bigger demands on alliance partners, Brexit and still consequences of the Financial Crisis. The risk landscape has over the last couple of years become much more complex and difficult to manage and COVID-19 adds an additional layer to this.
What are the areas of evaluation that have been reconsidered as a result of the pandemic?
Fortunately the tools risk managers have at hand have increasingly become more sophisticated. The pandemic is in this regard not different from any other crisis, the tools need to be applied and evaluations need to be performed. The pandemic has however changed the emphasis and weight on evaluations in certain areas. ORM in general, business continuity management, information risk management, and conduct risk in a working from home environment of vast numbers of staff have created the need to adapt the evaluation of risk exposure to the new normal.
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