As Genpact continues to build and grow its risk practice I find myself engaged in extremely interesting and insightful discussions with CROs across the world. It has been an interesting few years for the risk functions within banks. As will all interesting times, they come with unique challenges. One of the key outcomes of the 2008–2009 financial crisis was consolidation across the banking industry. A number of smaller banks merged, or were taken over by bigger organizations. As with all mergers, this trend posed unique problems of data consolidation: Quite simply, there is no single source of truth. This is today's major challenge for CROs.
Regulations, of course, continue to evolve and challenge the risk function. From Basel III, to the Dodd-Frank act, to meeting Federal Reserve Comprehensive Capital Analysis and Review requirements, all require new techniques from banks, both quantitative and qualitative. As lessons learned from each year are applied to regulations they become more stringent. This, in turn, creates greater demand from banks to have experts who can help from a consulting and execution standpoint.
The second part is crucial as there is a huge war for talent in the risk domain. The shortage of qualified people is particularly notable in traditional areas of credit risk, as well as when executing the demands from new regulations. I had spoken about a lack of stress testing talent in my earlier blog: Retaining model validation talent beyond 12 months? Now THAT is a true stress test
All of this compliance needs to happen while banks remain profitable and provide excellent service. I talk through some of the challenges in this video as well.
A trusted partner helps with not just the consulting and advice, but also with execution wherewithal. Genpact has worked with a large number of major banks over the last 17 years and – thanks to this lineage – has the unique advantage of understanding processes end to end. This knowledge brings with it an ability to understand the culture of the bank – a crucial element in making vendor relationships work, as well as in building talent from the bottom of the pyramid.
Are you attending the 16th Annual Risk Management Convention of GARP? I speak there on the 24th of February on the topic “Balancing Outsourcing Risk and Reward.” I will be joined by Ivan Pooran, Enterprise and Operational Risk Managing Director, GE Capital NA, Commercial Lending and Leasing. You can also meet us at Booth 17 at the event. Look forward to seeing you there.