One Sunday evening my wife and I took in the musical “Chicago,” a sensational tale of sin, corruption and all that jazz, set in prohibition era Chicago, my hometown. The story is a sizzling satire on corruption in the administration of criminal justice and the concept of the “celebrity criminal.” Listening to the lyrics sung by the hapless character Amos, I suspected that even the most confident of us might empathize with him as he sings ‘Mr. Cellophane’:
“If someone stood up in a crowd
And raised his voice up way out loud
And waved his arm and shook his leg
You’d notice him
If someone in the movie show
Yelled “Fire in the second row
This whole place is a powder keg!”
You’d notice him
And even without clucking like a hen
Everyone gets noticed, now and then,
Unless, of course, that personage should be Invisible, inconsequential me!…”
I wondered if these lines might also express the sentiment of Paul Moore, a former senior risk officer at British Bank HBOS (Halifax and Bank of Scotland), who claimed that he warned his bosses that the bank was moving too fast and raised concern that risk warnings were ignored. The discussion of the risks taken by HBOS was particularly pertinent, when Lloyds Banking Group, which now owns HBOS, announced that its acquisition would be announcing full year losses of about £10bn.
Moore said his warnings to his bosses—including former chief executive James Crosby, an economic adviser to then Prime Minister Brown—were dismissed and ultimately led him to finally be noticed just enough to lose his job.
Indeed, many risk managers may well harbor a special empathy for the musical’s Amos. A look at a survey of FTSEE 100 risk managers finds only half view themselves as influential within their organizations. One in eight say they are not at all influential. One third say they are only quite influential. Apparently, ‘Invisible, inconsequential me!’ has plenty of company among risk managers.
Effective risk management requires senior risk managers to become truly influential right on up to the board level and be respected across the organization.
Despite a growing population of risk managers, realized risk is a fact of life these days. In the current environment of economic uncertainty, where the painful cost of inadequate risk management is being demonstrated every day, it is disappointing that ‘Mr. Cellophane’ risk managers do not seem to wield enough clout (albeit not Chicago-Style “clout). Effective risk management requires senior risk managers to become truly influential right on up to the board level and be respected across the organization.
As the role of risk manager has developed and companies have gained greater experience with it, the profile of the ideal risk manager has shifted. Leading-edge companies agree that a risk manager should be analytical and bright. He or she must, after all, assimilate and understand a mass of information from a variety of sources in the organization. In addition, the risk manager in many companies both guides the usage and understands the output of highly sophisticated modeling tools.
The risk manager, above all else, is a leader and communicator.
Nonetheless, those are not actually the critical competencies of the effective risk manager. The risk manager, above all else, is a leader and communicator. From the moment that the risk manager embarks upon the formal risk assessment process, all the way through risk identification, analysis, planning, tracking and controlling, the effectiveness of her communication will dictate how successful the overall process will be. In addition to that, she must be able to build strong political partnerships with business and corporate staffs, communicate to a wide variety of audiences in clear, understandable language, and be a skilled facilitator of organizational action more than simply a technical manager of risk.
Like Amos, risk managers need to overcome invisibility to become effective. Until then, they’ll be perceived like Amos as he sings sotto voce the final line, “Hope I didn’t take up too much of your time.”
Group Atlantic combines superior industry insight and a strategic mind-set with a structured approach to managing consistently for the right risk-return trade-offs.
