In July 2015, the Bank Governance Leadership Network (GBLN) released their ViewPoints report in which non-executive directors from the world’s largest banks talked about best practices for financial risk management. The report is an in-depth and encompassing document that gives amazing insight into identifying and managing risks for all financial institutions, and more importantly into the minds behind those tasks and how they accomplish success in their own institutions.
While there is much to be found and considered within the 23 pages that summarise 30 different group conversations and one in-person meeting, the most surprising thing to be found in this document is the number of times that formality and lack of useful dialogue are identified as the main issues in identifying and managing any type of risk in any of the represented institutions.
According to those quoted in the ViewPoints report, the formality of board meetings leads to looking at risk reports as if they are checklists to be ticked off with minimal discussion. And each member knows the little secret as to why there is so little discussion going on.
Often, frustrated members look at the thousand-page risk reports in front of them and simply can not face the reading of it. Instead, these reports are then delegated to an underling to be boiled down to something manageable by choosing the few things that are “need to know” or “immediate risks” and all else is completely ignored except for the little nods that are given as the boxes are checked during the meeting.
This being the case, perhaps the best practice any institution can put in practice is a series of informal meetings by trusted directors whose sole purpose is to take those mammoth reports, break them down into manageable chunks, and come up with achievable aims for each one.
These much smaller, more concise, and focused miniature reports could then be sent piecemeal by priority to the board for the formal approval or dismissal. This practice has the possibility of bringing to light the many risks that are currently being overlooked, leading to avoiding further regulation and oversight that makes financial institutions increasingly difficult to operate.