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Best risk management ingredients: policies, processes, technology, people and culture
BESIDES hardware and software, a strong risk culture is also vital to the business strategies of financial institutions in Singapore, the winners of the inaugural Best Risk Management award tell The Business Times.
DBS Group Holdings has moved with the times in its risk management efforts, leveraging technological tools such as analytics and automation to keep its customers' data and money safe.
However, it does not stop at the robust policies, rigorous processes or innovative technology.
Tan Teck Long, chief risk officer at DBS says: "Even with the best efforts on the technology front, we are only as good as our people. Our focus is to future-proof our people and equip them with the necessary skills and abilities to stay ahead of the curve to create better business outcomes for our customers."
Hence, DBS has doubled up on its efforts to equip its staff with new skills as well as leverage their digital capabilities to expand their expertise in risk management and controls.
It also has trained its staff to be vigilant in cyber hygiene and cyber risks, given the extensive use of technology in today's world.
"Our multi-layered defences combine innovative technology solutions, such as virtual Web browsing isolation and micro-network segregation to reduce entry points for potential cyber attacks. We also developed user behaviour analytics to detect and respond swiftly in the event of an attack, " Mr Tan says.
The financial institution is also the first bank in Singapore to be certified with the Data Protection Trustmark, as it became focused on credit risk and portfolio management, financial crime, cyber security, and data protection in recent years.
DBS' risk management efforts have been recognised as it has bagged a gold for the Singapore Corporate Awards' inaugural Best Risk Management in the large capitalisation category, meant for companies with S$1 billion and above in market value.
Best Risk Management is introduced to recognise and raise awareness of the core and leading risk management practices required to support and sustain the strategic direction of companies, especially in this age of technology and disruption. The silver and bronze awards in the large-cap segment go to United Overseas Bank and OCBC respectively.
United Overseas Bank prides itself on its strong risk culture, which is based on four principles: enforcing robust risk governance, balancing growth with stability, ensuring accountability for all its risk-based decisions and encouraging awareness, engagement and consistent behaviour in every employee.
Chan Kok Seong, the bank's group chief risk officer, shares: "UOB's risk culture means that even in times when we find ourselves in new situations or when circumstances are unique - when what used to be black or white turns a shade of grey - our values serve as our moral and ethical compass.
"They guide us and ensure we make the right decisions, when there are no written rules or policies to prescribe our behaviour, especially when no one is watching."
Mr Chan reiterates UOB's stance on putting customers before profits no matter how tempting the rewards could be for the bank.
"In being able to strike the right balance between risk and reward, with the long-term view in mind, we can ensure that we make considered decisions and actions that are focused on our customers. We are not afraid to say no to trades or products that are not appropriate for our customers or will not serve their interests. We will not be side-tracked by perceived short-term gains, focusing instead on creating sustainable value for and building lasting relationships with our stakeholders, " he adds.
Over at OCBC, corporate values - Lasting Value, Integrity, Forward-looking, Responsibility and Respect - guide the way risk is managed. These values underpin the bank's sustainability framework which, in turn, drives its stakeholder engagement.
Vincent Choo, group chief risk officer at OCBC, says: "It also takes a solid team of future-smart people with integrity and honesty, and a team of people who always adopts prudent risk-taking in all our dealings and investments as well as takes a long-term view to create lasting value for customers, colleagues, shareholders and the communities we serve."
Last year, the bank helped its customers avert total losses of S$8.3 million when it prevented them from falling for the ruse of fraudsters and also helped them to recover their money. Its staff have been commended by the police for their anti-fraud efforts and vigilance.
"This was possible because all our employees are trained in fraud prevention and detection, along with crisis management. On top of training our people, we made significant investment into deploying a fraud surveillance system which monitors customers' transactions in real-time and an anti-financial malware system which detects anomalies of device behaviour on OCBC Bank online banking platforms," Mr Choo says.
He notes that risk has become increasingly complex in the digital age. Hence, there is a growing need to address non-financial risk brought about by the change in consumer demands and behaviour, and digitalisation on the back of technological advancements, but the bank has also maintained its focus on traditional facets of risk management in credit, market, liquidity and operations.
Sing Investments & Finance (SIF), incorporated in 1964, is a merit winner for Best Risk Management in the small-cap category - companies with less than S$300 million in market value.
SIF shares the mindset of other winners in that it sees a strong risk culture being vital to the finance house's business strategy. A strong and robust risk culture is promoted through the concerted effort by the board, management and employees.
Its board is responsible for the governance of risk and overall risk management strategy and appetite.
Lee Sze Leong, chief executive officer at SIF, says: "While it is obvious that steering clear of all highly risky businesses might be the safest bet, for the benefit of our long-term growth, SIF cannot be totally risk-averse or else the company's bottom line will be adversely affected."
Mr Lee's role, therefore, is to strive to balance the risk and return equation to ensure that SIF can optimise the profits within a comfortable risk appetite defined and set by the board and the risk management committee.
The committee plays an active role in monitoring the risk developments in a changing landscape, especially with the digital disruption.
However, risk management is not only limited to the board and management. Great emphasis has been put on staff training programmes and communications to ensure that risk behaviours and practices are consistent across functions, with everyone at SIF embracing and complying with the risk culture.
For example, all the staff are required to pass training programmes for compliance, risk and information technology-related topics to equip themselves with the relevant skillsets to keep abreast with the latest developments in the risk, regulatory and banking environment.