Managing Conduct Risk
A methodology to proactively managing risk
Simple and memorable techniques to enable your risk owners to approach and manage risk using existing techniques that work.
To find simple and practical solutions
Many years ago when I started in Operational risk, a discipline that was still in its infancy. I was convinced that somewhere, someone far clever than me has already created solutions that I could adapt and use. Alas, I was confronted with an esoteric chart with impact on the y-axis and probability on the x-axis.
Then there is the infamous heat map, the prerequisite for all 'risk' reports. This troubled me for many years, as they either gathered loads of data and never delivered results or tried to deliver results without data. Not really much use.
Before I go on, I am talking about really subjective risks, those ones that give the risk manager sleepless nights.
I would love to say I had an epiphany and jumped out of the bath shouting Eureka. No, it did not happen like that, slowly by trial and error, I have learned and tested approaches to implementing risk assessments that work, and have generated results (not heat maps!). Most importantly and thanks to behavioral economics, I started to look at how change can be implemented in a more objective way, most importantly it needed to be proportional.
I have found some great ideas and approaches to risk management, but I have not yet seen it converted into practical solutions
So some of my really simple rules are built around today's biases, and these will change as they always do!
1) For the risk manager, not all risk is bad, there can be positive consequences from negative outcomes.
2) Practice your ability to focus on one risk at a time, it is counter-intuitive, then move on to the next.
3) All controls will fail at some point, accept that and never make it personal
4) Try not to look at risks 'in the round' until the very end, risk generally does not subtotal, neither does it add up when crossing risk types.
5) Never, ever, ever underestimate the power of money (i.e. revenue, profit etc) to challenge your rationalisation of risk
6) Never, ever, ever underestimate the power of sex/love/family/beliefs to make people do the most stupid things
For those who have seen my lecture here are the slides (at some point I will go into properly writing up the notes, a book in the making I feel?)
LINK TO PRESENTATION