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  • Writer's pictureDivya Eapen

Sustainable Growth – and Building a Strong Corporate Culture around it

Updated: Dec 5, 2021

Risk reward balance – everyone knows what it means, but how is it managed?

Risk assessment and management is a basic part of your day to day thinking, and is what keeps you safe, whether it is an automatic fast thinking reaction, or something that warrants deeper thought and analysis.

When companies are small and growing rapidly, you generally think about risks and revenue generation together. The group of people building the company is too small to separate strategic thinking between teams. It is natural to consider the risks of entering a new market or the downsides of pivoting from your original product to one that you think may sell better.

Separating risk management and revenue generation – the risks!

Now as companies get bigger, and scale up, risk management and revenue growth are often separated – you have a sales team that thinks about the next transaction, and you have the risk team to think about the downsides. We, at Risk Strategy Consulting, fundamentally believe this is not a smart way to operate. Of course you can have these teams, but you need both sides thinking about growth and risk.

Arguably, in much larger companies, risk and reward can be separated into origination and risk management teams. You have control metrics such as Return on Risk Weighted Assets, that offset potential revenue against the type of product and the risk of that specific transaction.

However, you’re at higher risk of unsafe decision making when:

  • Your revenue generation teams stop thinking about the risks intrinsic in transactions and business opportunities

  • Your risk team stops thinking about how to grow the company and loses sight of its commercial imperative

When this happens, you have a culture clash as the risk team is no longer seen as being entrepreneurial and enabling a company’s growth.

Rather than having a shared purpose, these two teams start have conflicting goals (or even the perception of conflicting goals). This is when you start seeing unhealthy behaviour, for example:

  • Risk managers are brought into transactions when they are fully baked

  • Risk management is not part of the day to day running and operating of an organisation

  • And worst of all, risk managers are kept out of strategic discussions

This is when you start having an ineffective risk culture, and your board, or regulators, will start to get nervous.

Language – do you have a healthy corporate culture?

So how do you know if you have a healthy corporate culture? First, check the language that people are using.

Is the origination / sales teams showing balance and talking about downsides? It doesn’t matter if they use the word risk or not, but when talking about a new transaction or product do they say things like, “does this deal generate enough revenue so that the manual work, the heavy lifting for this bespoke deal is actually justified?” That’s an operational risk discussion, even if no one has said the words operational risk.

It’s also about the language the risk team is using. Are they using jargon, acronyms, or terminology that is inaccessible to non-risk people? Or are they using simple, inclusive language, and messaging?

Second, if your risk team is talking about eliminating risks, well, that’s not a growth culture. The only way to eliminate risk is to do nothing. Your risk appetite, which is generally set by your board, should determine what risks and how much loss you are willing to bear, and your risk team helps you operate within it. However, there are clearly some risks which no company should take, where the risk appetite is absolutely zero - around money laundering and terrorism financing, for example.

Third, if people talking the same language and understanding each other, are they challenging each other in a way that is supportive and fosters creativity?

So let’s save some money and not have a risk team!

Does this mean there’s no need for a risk team? Absolutely not.

Risk teams don’t have to be massive, but you want the subject matter experts in your company:

  • You need compliance experts to make sure you know what you are doing is allowed with the licenses you have and where you operate

  • You need credit experts you can take with you to client meetings to brainstorm a transaction and discuss how to structure it

  • You want operational risk experts to advise you whether an action you’re proposing will create additional risks, and if the transaction still makes sense on that basis

As your company grows, you may need policies and frameworks, licenses to operate in other jurisdictions. And you want the best people preparing them for you, and making sure that they are bespoke to your organisation, and teaching your teams.

Even if you buy something off the shelf, you need to make sure that it fits the culture, values, and language of your company, and it addresses the risks that your company actually takes. You want advisors that you can talk to about your strategy and any new business.

A good risk partner (I avoid the term risk manager – because we all manage risks and growth):

  • Understands why the company is doing what it does – its purpose or commercial imperative

  • Provides broad frameworks under which to operate

  • Challenges and advises you on how best to enable and sustain growth

You need smart, knowledgeable, accessible people challenging you, who clearly want to grow the company with you.

The first thing we do when we go into your company is listen. We listen to who is talking about risk, and how they are talking about it. We talk to people at all levels and try to understand whether the messaging from the Board is actually understood and applied on the ground. We spend time understanding how risks are managed, who risk is managed by, and whether risk is a part of the regular strategic discussion?

It’s about really understanding the existing corporate risk culture.

If your corporate culture isn’t strong enough on the risk side, we can help you change the culture so that it is. Or if it is now, how can we make sure you keep that growth culture with strong risk management as your company scales up?

We’ve seen corporate cultures that work, and we’ve seen corporate cultures that don’t. We’ve worked in massive institutions, and we’ve worked with start-ups. There is no one size fits all solution, but experience matters, and we bring a set of potential tools we can use to help you. Some of these allow for quick wins, and some require deep, long-term work.

We will work with you to build a risk culture and framework that is appropriate, in messaging and scope, for your organisation.

We spend a lot of time with your risk management teams, and make sure that they are accessible, and that they communicate in a way that is concise, straightforward, and engaging. We spend time with your business and leadership teams to make sure that people feel comfortable questioning the status quo and being creative.

We can help your senior management team communicate with each other and their teams in a way that shows balance and collaboration, and sets the right tone for the whole company. This fosters a culture where people at all levels can challenge each other.

Building a business is fun, and we can help you on your path to safe, sustainable growth.

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