Risk managers need to choose American banks if they want authority, Europeans if they want a deep understanding of the issues
If you're a risk manager working for a bank in Europe, the chances are that your day-to-day responsibilities differ from your counterparts in the US. But a general need to improve risk capabilities is changing the types of people firms are looking to recruit.
In a broad-ranging report into banks' post-crisis confidence levels, McKinsey suggests that although there's a widely held view that risk needs to improve, there's no consensus on how to do it.
Banks in the US, it says, are creating '"accountability chains", ensuring risk is easily traceable and key decision makers in the business can be accessed, while firms in Europe are "deepening internal understanding" about the risk profile of the business. Neither ensures that risk responsibility is embedded throughout the organisation, however.
All this may sound a little vague, but both approaches have their strengths and weaknesses as well as shaping how risk managers perform their duties.
The US banks are aiming to appease regulators by demonstrating they have the decision-making process in place, but this also means risk managers are more likely to sit in their own silo, and ensure they're not the one held responsible should something blow up, suggests Selwyn Blair-Ford, head of global regulatory policy at Wolters Kluwer Financial Services' FRSGlobal.
European banks are ensuring a more "holistic" view of the risks being taken and more enhanced communication between the different types of risk managers, but the approach lacks structure, so risk can "fall between the cracks", he adds.
"The first approach will appeal to risk professionals who see themselves as integral to how the business conducts itself, and a conduit for shaping the risk profile across various divisions," he says. "The second appeals to the more technical risk manager, but doesn't create a coherent approach to risk across the organisation. In reality, the most effective route is to take each type of risk professional out of their comfort zone in order to mitigate the inherent weaknesses of each."
A combination of this type of person is, however, exactly what banks are now hoping to attract. It's no longer enough to be a purely technical risk specialist, nor is the bridge-builder-type likely succeed in the long term.
"Banks want risk managers with the strategic vision to embed risk management into the decision-making process at an early stage, rather than on a transaction-by-transaction basis," says Adrian Marples, risk management executive search consultant at Leathwaite International. "However, this needs to be combined with strong technical skills."