Managing reputation risk in an evolving landscape with increased uncertainty
CRO Series Issue 2: Analyzing the evolving risk landscape amidst the COVID-19 pandemic
May 31, 2022
Crossing the chasm from data management to data governance
May 31, 2022The views and opinions expressed in this article are those of the thought leader and not those of CeFPro.
By Ebbe Negenman, Chief Risk Officer, Aegon Bank
Can you provide some background on reputation risk monitoring and response strategies to events?
As a relative new player in the market with the ambition to put the client interest first in everything we do, protecting Knab’s reputation is key in all we do. Although we like to take intelligent risks all of our employees are aware that we do put our reputation at risk.
On a continuous base we do monitor our reputation directly by means of a net promotor score (NPS). But more important we invest heavily in client service desks. We believe that the reputation of the bank is guarded best by always being open and fair in the communication to the client.
What are the best practices when managing risk programs within a climate of increased uncertainty?
We foster a culture of being adaptive to change. Of course we don’t have a crystal ball that allows us to predict future state of the world. But driven by the risk team we do create business continuity scenario’s, that we practice with the complete leadership team. A nice anecdote is that we were in the middle of practicing a working from home situation as part of a drill, when the covid virus emerged. Next the practice situation was smoothly continued into a real life event.
I believe that risk programs are the foundation of the improvement needed of the bank. We therefore try to keep them rolling and deliver on due dates, whatever happens. So far we are able even in the current covid crisis we are so far, still able to deliver what we promise. I do believe it is a mind set, or risk culture that is driving that ambition.
What are some of the key lessons learned for managing reputation risk during a pandemic?
The key element is the importance of a proper risk culture within the bank. We should learn from the pandemic. Of course the pandemic is an obstacle in doing our banking business, but the obstacle is showing us a way of doing business differently. To see this, you need to be open minded and have the ability to take intelligent risks.
It should be fair to say that you need a bit of luck as well. The pandemic showed that our digital way of doing banking (we don’t have branches) was the right choice. Although it was not that we doubted on this vision, but we never thought that a pandemic would prove we were right.
What are the key challenges involved in having to respond quickly to an ever-evolving risk landscape?
Banking is changing among others due to technology on one hand and regulation on the other hand. The big challenge is to manage the reputation risk stemming from both these evolutions. If you are not an explorer on technology, or not a smart follower, you are likely a dinosaur. And we all know what happened to the dinosaurs. It might take some time however before you see the effects. Same holds for new risks e.g., stemming from the climate change, if you not manage these risk in your business model you are not fit for the future either.
On top of that there is the regulatory risk. Accepting client that perform money laundering activities is not legal and has a disastrous effect on you reputation. Compliance risk is therefore directly translated in to reputation risk. Two of my former employers (ING and ABN Amro) are experiencing that now heavily. Altogether it simply implies that the CRO is becoming a pivotal member of the executive board.
Can you explain the importance of managing media coverage during an evolving risk landscape?
It goes without saying that your presentation in the media can break or build your reputation. Clients base there perception of the bank on what they see in the media, they do not attend the board meetings of course. So how you are perceived by the client is key.
At Knab we try to be as transparent as we can . For example a month ago the CEO made a statement on LinkedIn explaining why a reorganization was needed. That is different form the way the financial industry made use of the media before. I think it is fitting in the current time that you are open as leader and you admit if things can be improved. Including your own leadership. But it is easily said and difficult to adhere.
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