Leading organisations are moving away from rigid, prescriptive controls; today's dynamic markets and complex macroeconomic landscape demands a more agile and risk-based approach. This shift presents an opportunity for banks to move beyond a compliance-driven mindset to embrace a culture of controls that prioritises efficiency, effectiveness, and proactive risk management.
From Prescriptive to Outcome-Based: A New Era of Risk and Controls
Regulation has traditionally been regarded as prescriptive, outlining specific requirements that banks must implement. While this approach provides a clear framework of rules for banks to comply with, it often creates a “tick-the-box” mentality. The result is then layering of manual control upon manual control to meet a disparate set of regulatory requirements.
But the regulatory landscape is shifting towards a more outcome-based approach, empowering banks to design controls that fit their unique risk profiles and business models. This requires a cultural shift, a need for organisations to make judgment calls to figure out the most effective way to protect the bank. As with any cultural shift, it requires people to think and behave differently
Defining a Culture of Controls
A strong culture of controls across all levels of the organisation is needed to thrive in this environment. It requires a shared mindset and commitment, where all colleagues clearly understand how their role contributes to safeguarding the bank and enabling sustainable growth in line with the bank's risk appetite.
A strong culture of controls is characterised by:
The Drivers of a Culture of Controls
Building a culture of controls requires an approach that focuses on people, training, governance, and communication. By focusing on these key drivers, organisations can effectively steer their culture in the right direction:
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Tone from the top and middle
Role modelling and setting the tone from the top, encouraging open and transparent communication and empowering individuals to take ownership of risk management.
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Training
Equip employees with the knowledge, skills and tools necessary to design, implement, operate and monitor controls effectively.
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Governance
Establish clear governance structures, ensuring accessible and well-enforced policies and accountability control frameworks.
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Roles and Responsibilities
Clear and structured reporting lines, enabling conducive cultural dynamics and accountability for controls across all LODs.
The Cost-Benefit Equation: Investing in a Culture of Controls
Embedding a culture of controls requires an upfront investment in training, resources, and technology, but the long-term benefits outweigh the costs.
Embracing a culture of controls is a necessity, not a nice-to-have that requires commitment from stakeholders at all levels. Get it right and unlock a proportionate approach that drives safe, sustainable growth.
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