HR Crisis, Technologies Defy Financial Sector Strategies

Global financial services organizations are struggling to align risk management frameworks, culture, and talent to achieve change, a new report has found in four key areas.

According to findings in the Risk, Culture, and Talent in Global Financial Services report released by Deloitte Touche Tohmatsu Limited (Deloitte Global), at the weekend, senior financial services leaders including CEOs, CFOs, CHROs and CROs decried the impact of grappling with several risk and regulatory environment related issues.

Speaking on the report, Heather Stockton, Deloitte Global Human Capital Financial Services Industry Leader, said, “At Deloitte we believe executives and business leaders must work together to drive change in order to create an environment that can quickly adapt to the ever changing demands of the regulatory landscape.

“Our goal with this report is to explore these opportunities and help enable a dialogue among key business leaders on how to address the importance of organization, culture and talent in managing organizational risk.”

The global survey findings offer four key areas of opportunity for organizations to navigate the current and future regulatory environment.

They include, risk, culture, and talent in global financial services and reinforce the need for increased CXO accountability and additional clarity regarding the board’s role in providing increased stewardship, governance and management of talent-related risk.

Others are, reframe talent, compensation and performance management programs to reflect risk management tenets and refine the culture to move toward one of trust and ‘risk intelligence’ where everyone understands the organization's approach to risk, takes personal responsibility to manage risk, and encourages others to follow their example.

The survey found only 36% of respondents indicated HR risks are included as part of the risk management framework suggesting an opportunity to expand risk management’s focus on people in addition to controls.

Similarly, 67% of survey respondents said active leadership involvement is required to manage risk. C-suite leaders and the board must serve a more prominent role in driving risk governance and demonstrate stewardship in managing risk.

Also, compensation and rewards are falling behind performance management in ensuring alignment with the risk framework.

Among those surveyed, there is without a doubt a strong momentum to addressing talent management representing 80% of respondents and culture (69%) in light of increased regulation and risk requirements.

In the survey 61% of respondents have seen no increase in behavioral indicators, such as personal responsibility for the management of risk; and 57% of respondents have seen no increase in the alignment of individual interests, values, and ethics with those of the organization's risk strategy, appetite, tolerance, and approach.

“This report makes it clear that in order to be successful in today’s highly regulated environment, business, talent and risk leaders across the organization must engage in continued, focused and open dialogue,” said Stockton. “Financial services organizations that consider how they can reinforce, reframe and refine their approach to risk management will be well-positioned to demonstrate that embedding risk practices in the fabric of the organization is an enabler of success and longevity.”

Deloitte Global had announced the launch of the Deloitte Center for Crisis Management to provide clients with Deloitte’s breadth and depth of solutions in an integrated crisis management service through its global member firm network (Deloitte).

Equipped to handle the growing severity and frequency of crises, whether natural or manmade; economic, political, financial or technological, the Center will deliver a high-level of crisis readiness.

Elsewhere, financial fraud and, especially cybercrime, are growing exponentially.

The latter costs the global economy over US $400 billion1 a year.

In 2013, 70% of companies surveyed suffered from at least one type of financial fraud resulting in a loss of 1.4 percent of revenues.

Natural and environmental disasters also continue to create crises for businesses; the world saw 300 natural disasters in 2013 alone.

Regardless of the nature of the crisis, how a company prepares for and reacts to it can determine the extent and duration of reputational damage.

Add to that, a greater intolerance for reputational risk among business leaders.

According to a recent survey of c-level executives, board members, and risk-executives, reputation was cited as the leading strategic risk facing companies.