Jeff Judy

Jeff's Thoughts -September 30, 2009

Your Job Description

I may not know your job title, within the bank, but I know what your job is. You are a risk management professional, someone who truly understands risk, who is comfortable dealing with risk, who knows that "managing risk" is not always the same as "minimizing risk," someone who takes pride in facing up to the chance of failure as part of optimizing the opportunity for success.

In the common vernacular, "risk" is simply a dirty word. Something that is "risky" is to be avoided. The only people we are supposed to admire for their willingness to embrace risk are people like acrobats and entrepreneurs. And we only admire the latter after they have made millions from a two-bit idea, and been written up in one of the airline magazines.

Now, the risk of failure, or at least of a less than optimal outcome, is inherent in every job, in every business. A receptionist, a teller, an order-taker risks doing something that will drive away a customer. A salesperson, customer service person, and the individuals involved in manufacturing products, filling orders, or doing repairs all risk failing at their tasks in ways that could hurt the company.

But in most businesses, employees and their managers don't like to think about the risk of falling short of standards or goals. They think in terms of completely eliminating the risk of failure, whether at individual tasks, or as a business.

In banking, we know that we trade in risk, in a way. We know there will always be loans that go bad, no matter how hard we work to head off problems. We know there will always be relationships that we lose, that it's always possible that new business, environmental, or economic conditions will have an impact on our customers that we, too, will feel.

And shouldn't that give us a significant advantage over other industries? No business can eliminate all risk. But we in banking know how to talk about it, we recognize it as an integral part of any business, and understand that managing an appropriate level of risk will allow us to be successful.

Why not leverage your deep familiarity with the risk in some parts of the organization to develop more effective employees in all parts of your organization? Why not make understanding and managing risk an explicit part of everyone's job in your bank?

Certainly, the types of risks different employees deal with will vary by function. While credit losses are an obvious risk to be managed by bankers and portfolio managers, tellers and other customer service people have to balance, say, being too energetic versus being too reserved in their dealings with customers. Marketing and sales staff balance the risk of staying with a tired old message too long, against the risks associated with trying out a new untested message.

Employees in businesses that don't understand risk play it safe to the detriment of the company's success. Rather than make a decision and take responsibility for it, in the hopes of advancing the company's goals, these employees limit themselves to doing whatever can be blamed on the employee manual, the computer, or "what everyone else does."

The banks that beat their rivals enjoy cultures in which employee judgment, responsibility, and decision-making are key elements in the business. Given that the core of our business is to act as risk intermediaries, we are in a unique position to guide, and empower, our employees to better performances, based, in part, on their realistic understanding of risk.

Risk is what we do. In truth, risk is what every business does, to some extent. But we are the real pros at it, and many of us are overlooking a chance to leverage that expertise into better outcomes throughout the organization.