Reshaping Conduct and Risk Culture in Banking

(Note:  the thoughts below are drawn from a keynote address and workshop I will be giving in Sydney, Australia on October 12th to the Culture and Conduct in Financial Services Conference.)

rotten-apple-barrel

Between 2008 and 2015 the global financial services sector has been fined over $300 billion by regulators and government agencies for excessive risk taking resulting in trading losses, money laundering, outright fraud and mis-selling of products and services. And many industry and academic experts put the global recession which began in late 2007 down to the casino-like dealings of banks, S&Ls and Insurance companies in a search for greater and greater ways to make profits, which usually came with greater and greater risk.

As a result, the banking industry is currently at the bottom of the consumer trust table for institutions, and just barely above politicians for trust by the general public.

trust-in-institutions-2015

And a number of once highly respected, bell-weather banking institutions, like CitiGroup and Bank America, have been trading at one half to one-third their pre-recession high share price for the past 8 years!

citigroup-share-history

Culture Change and Risk Culture is the Flavour of the Month

The term Risk Culture is used within the financial services industry to describe the shared perceptions among employees of the relative priority given to risk management, including perceptions of the risk-related practices and behaviours that are expected, valued and supported

According to a recent Ernst & Young study, nearly 75% of global banks and financial institutions claim to have begun efforts to improve the culture of banking and in particular, improve the risk culture.

Yet that same study concluded that only 38% of executives believe their risk culture is aligned with the stated risk strategy (risk appetite) of the bank. In simple terms, the movie and the words don’t synch!

As a result of external pressures, such as greater regulation and compliance requirements, mounting fines and declining public trust, banks and financial institutions are implementing multiple actions and additional risk structures in order to improve risk conduct and decrease the number of negative risk events.

bank-responsed-to-risk-culture

Great, But Something’s Missing!

If you look at the above carefully you will see many actions and internal risk structures that banks are taking to improve risk conduct.

But to me, something very important is missing with all these activities.  An understanding of the Overall Corporate Culture in which all these activities take place.  New Risk Structures are supposed to improve the Risk culture, which in turn is supposed to improve conduct.  But what most people don’t understand is that this process takes place inside the existing corporate culture!

banking-culture-context

Corporate culture is much like the waster in an aquarium.  Clean and clear water makes everything work.  Dirty and foul water makes the whole aquarium toxic!

culture-as-aquarium

On October 12th in Sydney, Australia I will be giving a keynote address and workshop to a conference on Culture and Conduct in Financial Services.  My goal is to help the attendees understand what culture is, why it is important, and what are the 4 key levers that can truly impact and improve conduct and risk-related behaviour in the financial services industry.

Here’s a link to the conference if you want to know more.  As you can see, I am the only non-banker on the list.

http://www.criterionconferences.com/event/ccfs/

Should be fun!

Written and Posted by: John R. Childress

Senior Executive Advisor on Leadership, Culture and Strategy Execution Issues,
Business Author and Advisor to CEOs
Visiting Professor, IE Business School, Madrid

Website: www.johnrchildress.com

e: john@johnrchildress.com
Twitter @bizjrchildress

Read John’s blog,

On Amazon: LEVERAGE: The CEO’s Guide to Corporate Culture

Read  The Economist review of LEVERAGE
Also on Amazon:   FASTBREAK: The CEO’s Guide to Strategy Execution

John also writes thriller novels!

About johnrchildress

John Childress is currently Visiting Professor in Strategy and Culture at IE Business School in Madrid and a pioneer in the field of strategy execution, culture change, executive leadership and organization effectiveness, author of several books and numerous articles on leadership, an effective public speaker and workshop facilitator for Boards and senior executive teams. In 1978 John co-founded The Senn-Delaney Leadership Consulting Group, the first international consulting firm to focus exclusively on culture change, leadership development and senior team alignment. Between 1978 and 2000 he served as its President and CEO and guided the international expansion of the company. His work with senior leadership teams has included companies in crisis (GPU Nuclear – owner of the Three Mile Island Nuclear Plants following the accident), deregulated industries (natural gas pipelines, telecommunications and the breakup of The Bell Telephone Companies), mergers and acquisitions and classic business turnaround scenarios with global organizations from the Fortune 500 and FTSE 250 ranks. He has designed and conducted consulting engagements in the US, UK, Europe, Middle East, Africa, China and Asia. Currently John is an independent advisor to CEO’s, Boards, management teams and organisations on strategy execution, corporate culture, leadership team effectiveness, business performance and executive development. John was born in the Cascade Mountains of Oregon and eventually moved to Carmel Highlands, California during most of his business career. John is a Phi Beta Kappa scholar with a BA degree (Magna cum Laude) from the University of California, a Masters Degree from Harvard University and was a PhD candidate at the University of Hawaii before deciding on a career as a business entrepreneur in the mid-70s. In 1968-69 he attended the American University of Beirut and it was there that his interest in cultures, leadership and group dynamics began to take shape. John Childress resides in London and the south of France with his family and is an avid flyfisherman, with recent trips to Alaska, the Amazon River, Tierra del Fuego, and Kamchatka in the far east of Russia. He is a trustee for Young Virtuosi, a foundation to support talented young musicians. You can reach John at john@johnrchildress.com or john.childress@theprincipiagroup.com
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