Q1 – Bogie, can you please tell the Center for Financial Professionals about yourself and your professional background, and your current focus?
20+ years in risk management with BMO, S&P, and Sun Life, both as a practitioner and consultant. I am the CRO of CWB Financial Group. Implementing A-IRB and IFRS-9 are keeping us busy, but my focus and vision have been on Strategic Risk Management, and optimization of Capital, business mix, and IRRBB. I still enjoy doing Risk research.
Q2 -, You will be presenting within the Future of Risk Management Stream, at the 6th Annual Risk Americas alongside BankNewport and Canadian Western Bank. Can you briefly tell the audience how technology and regulatory advances have had an impact on risk managers?
The regulatory response to the 2007/8 crisis has been strong, and more to come with Basel IV. With ever-increasing capital requirements, ROEs are historically low. Low (even negative) interest rates and flat yield curves continue to pressure the NIM, testing the limits of the traditional banking and insurance company model. As well, FinTech represents a sea change. Some businesses will be lost forever, the others will fundamentally change with a very different service and distribution model.
Financial institutions will need to create efficiencies not only in their operating models but also in their management of capital and IRRBB.
Q3 – How should risk professionals prepare for the evolution of risk management as a function?
Risk management must evolve from traditional risk compliance (the brakes of the car) to Strategic Risk Management. Risk is our business and it is the control variable in the objective function. It is our responsibility to determine the optimal risk strategies to improve ROE. That is the optimization of business mix, capital allocation, and IRRBB. It is not enough to keep the business in the sand box – we must put it on the ‘optimal’ path.
This is very different mindset and requires re-engineering and organizational realignment. To prepare for the task, we need to really understand our business and financial strategy, and the necessary re-engineering of risk, capital, IRRBB and performance management practices.
The future risk manager will not only be a financial engineer, but also a strategist, an economist, and a technologist.
Q3 – Market conditions will undoubtedly have an impact on the business. How can FIs pre-empt and mitigate these risks before the event?
By being not only a good financial engineer, but also being a good strategist, an economist, and a technologist. Risk now has many faces.
Q4 – How should risk managers utilize the opportunities which technology provides to better manage risks?
The strategic and existential risk of getting FinTech or digital technology wrong. In terms of conventional risk management, big and smart data that is real-time and previously unavailable offers so many opportunities in assessing risk.
Q5 – What factors should be highlighted when discussing the future impact on risk managers?
There is a need to find efficiencies in capital, IRRBB and operational; and understanding FinTech. Those who understand the future and adapt accordingly, will thrive. Others? Well, dinosaurs were not able to adapt.