Assessingthe Chief Risk OfficerAn Introduction to Interviewing the CRO
Assessing theChief Risk OfficerThis guide is ideal for Chairmen, Board Members,Chief Executive Officers, and Chief HumanRe...
Seniority / Organizational ImpactSample Questions(Metric Based on Size and Seniority)   Reports to: Direct Reports (What a...
Commercial AcumenSample Questions  Describe a time you had to align the business with the credit strategy? What was the si...
Technical Expertise/Risk CompetencySample Questions  How well do you know the local/regional legal systems?  Describe a ti...
Vision & StrategySample Questions  What is your Risk Management philosophy? Are you Conservative or are you more commercia...
Communication StyleSample Questions  Can you give me an example of a time you had trouble seeing eye to eye with a co-work...
LeadershipSample Questions  Describe your least favorite person on your team?  Describe your least favorite person in the ...
Analytical ThinkingSample Questions   Tell me about a time when you developed a new approach or offered a new idea that le...
give us. Finally the biggest opportunity to assess     an opportunity one should never miss.the candidate is after the int...
AboutStanton Chase InternationalStanton Chase International                         Industrial, Financial, Consumer & Reta...
DUBAI, UNITED ARAB EMIRATES                                                                                               ...
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Stanton Chase - Assessing the Chief Risk Officer - White Paper by Shane Phillips

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This guide is ideal for Chairmen, Board Members, Chief Executive Officers, and Chief Human Resource Officers who are hiring and assessing Chief Risk Officers (CROs). It can also be an effective training tool for Chief Risk Officers who are preparing for their own interview process. This paper describes only one step in a 5 step assessment process. The full 5 steps are described in more detail at the end of this document. The initial assessment of a CRO and first step in the process starts with 7 key areas which are:

+ Assessing the
+ Chief Risk Officer
+ Seniority / Organizational Impact
+ Technical Expertise
+ Commercial Acumen
+ Leadership
+ Analytical Thinking
+ Communication Style
+ Vision / Strategy

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Stanton Chase - Assessing the Chief Risk Officer - White Paper by Shane Phillips

  1. 1. Assessingthe Chief Risk OfficerAn Introduction to Interviewing the CRO
  2. 2. Assessing theChief Risk OfficerThis guide is ideal for Chairmen, Board Members,Chief Executive Officers, and Chief HumanResource Officers who are hiring and assessingChief Risk Officers (CROs). It can also be aneffective training tool for Chief Risk Officers whoare preparing for their own interview process.This paper describes only one step in a 5 stepassessment process. The full 5 steps are described recommend you bring in a specialist to do this.in more detail at the end of this document. The One of the most effective people I have everinitial assessment of a CRO and first step in the seen at this task is Mr. Jan Bladen, Chiefprocess starts with 7 key areas which are: Operating Officer of Dubai Financial Services Authority. He systematically tackles this issue (alignment of risk appetite) through the Seniority / Organizational Impact creation of a Board consensus in less than one Technical Expertise and a half hours. Of course Jan has been Commercial Acumen involved in Risk Management for over 20 years and is a guru in his field. While you may not be Leadership able to hire a guru to manage this process, I Analytical Thinking highly recommend ensuring you have someone Communication Style on the Board with Risk experience. Hiring a Non Executive Director who was a former CRO or Vision / Strategy Risk professional is a good way to add this expertise to your leadership team at a nominalWhile many people feel the assessment starts cost. I will not go into more detail aboutwith the candidate who is applying to be a CRO, aligning the team on what is a reasonable riskhowever it actually starts with the company itself and what is not in this paper; however I didand its CEOs/Boards risk appetite. This should want to stress how important alignment is toinclude a clear understanding of the vision, having a successful hiring process for the CRO.direction and strategy of the business, as a risk tothe business can only be defined in so much as it In 1993 GE Capital hired the first CRO in theimpairs these elements. A risk therefore is an world, a man by the name of Mr. James Lam.event which inhibits an organization from Thus the CRO position is relatively new and as aachieving its objectives. result it is often loosely defined. Responsibilities can vary from one Chief RiskGenerally, a Board consists 5 to 12 executives Officer to the next and we cannot assume thateach characterized by his/her own risk tolerance. just because someone is currently a CRO thatThe Chief Executive Officer will also have his own they are capable of performing at the level wepersonal appetite and together with the Board require. The first thing one has to do is assessand all the senior executives, will dictate the how senior the individual is who is applying fortolerance level for the company. The more the position. Generally this can be tested by theambitious the vision the more risk the senior individuals reporting line, committee seats,leadership team will be expected to take and the board positions, etc. Does the CRO haveless ambitious the vision the less risk the senior ultimate authority and accountability for theleadership team will be expected to take. decision or are tough decisions escalated to aTherefore it is pertinent to take into account the Group CRO in head office? The starting pointvision of the company and its desired risk level for the assessment is the reporting lines andwhen deciding on what type of CRO is understanding exactly where the CRO inappropriate for an organization. Aligning the question sits in the organization. I have listedBoards risk appetite is a science and I some suggested questions below; page 1
  3. 3. Seniority / Organizational ImpactSample Questions(Metric Based on Size and Seniority) Reports to: Direct Reports (What areas report to the CRO, Operational / Credit Admin / Remedial / Wholesale Risk/ etc) Which Committees are you on? How does the Governance structure work at your organization? Describe the approval process and the perspective limits of authority? How does a proposal move through the system? What does the approval chain look like? How is the Risk team structured? How big is the Risk Team? Can you draw the organizational structure of the Risk team? What committees are you a part of? (ALCO/EXCO / Risk / Audit) Which area of Risk is your core strength? (Market / Operational / Wholesale / Retail / Treasury / etc) What is the future of Operational Risk What are the three biggest mistakes banks make when assessing Market Risk?CommercialAcumenOnce the seniority of the CRO is established one countrys GDP growth is coming from. If yourmust next assess the candidates commercial credit portfolio is growing asymmetrically inacumen. The CRO must be able to recognize relation to the markets GDP growth you areblind spots, “see around corners” and understand heading into a serious problem. A good CROwhere the pitfalls in the market are. As markets should know which metrics to look at and bechange or clients’ agendas drift, the CRO must be able to discuss market trends in depth.able to stave off downside exposures early onand help course correct the organizationsposition. The best CROs have the pulse of themarket and are able to stay clear of bubblesbefore they burst. They must possess a deepunderstanding of their clients counterparty riskand are able to identify secondary risks in a jiffy.This sometimes means changing strategy mid-stride and can often find them locking horns withbusiness heads.The CRO should have insight into where theorganization will be driving its biggest revenuestreams from and should know where the page 2
  4. 4. Commercial AcumenSample Questions Describe a time you had to align the business with the credit strategy? What was the situation, what did you do and what was the result? How can you manage business growth while maintaining appropriate risk thresholds? More banks play the price war, how will you deal with this? Do you oversee Remedial? Describe what you look for in a good Risk Manager? Where do you see the organization growing in the future? What industries are high growth areas?TechnicalExpertiseThe Chief Risk Officer must be viewed as a pillarof expertise in his/her field and must havecommanding knowledge of their subject matter.He/she must possess deep specializedknowledge complimented by a wealth ofexperience. The CRO must understand the localand regional legal idiosyncrasies of each regionhe/she is responsible for and should be able todiscuss the differences off the top of his/hermind. Not understanding these issues can provedisastrous. A key component to any risk agenda is the ability to constantly assess and monitor theThe CRO should intuitively know which key organizations exposures and risks. The bestperformance indicators to keep an eye on and CROs will not have to pause and think deeplywhich types of reports senior management about which KPIs they would use or whichshould be reviewing in order to ensure the management reports are most important. Theyorganization has the right red flag mechanisms in should have a clear blue print in their mindsplace to detect negative events at an early stage. about how to create a risk infrastructure. page 3
  5. 5. Technical Expertise/Risk CompetencySample Questions How well do you know the local/regional legal systems? Describe a time you were required to reduce the amount of bad loans in a portfolio? What was the situation, what did you do and what was the result? Describe a time you had to restructure bad loans? What percentage of bad loans or toxic assets were you able to turn around? Were you able to limit the banks exposure to these toxic assets? What kind of MIS do you use? Which packages and which KPIs do you include in the dashboard for the MIS? What MIS packages do you provide to Senior Management, to the Committees and the Board? If you started at the bank tomorrow which KPIs would you use to assess the current credit situation and which success metrics would you use? NPV, ROE, NPL, GPM, IRR, NOP, RWA, LGD, etc? What is the toughest thing about Risk Management?Vision &StrategyThe CRO is often viewed as the nemesis of thefront office, but the best CROs are commerciallyminded individuals with a clear view of how tobalance revenue growth while maintaining anacceptable risk appetite. This often requires anindividual who is more commercially savvy andtuned into the macro and micro-economic trendsthan the pedestrian masses. Those CROs relationships in a specific area.operating in the top 10% of their profession will The majority of CROs will not be visionaries andinvariably push and pull their organizations in most will not have led a new agenda. Generallyand out of key sectors and sub-niches ahead of this skill has not been cultivated within thereceding profit pools. They will intuitively know lower ranks of the risk department and thus iswhen it is time to get out of certain relationships not a common skill among CROs. However, thisor when their policies and procedures should will change as the risk profession matures andencourage the institution to deepen their continues to blossom. page 4
  6. 6. Vision & StrategySample Questions What is your Risk Management philosophy? Are you Conservative or are you more commercially aggressive than you CRO peers? What asset classes would you encourage? Which industries are you averse to? Which ones would you prefer or encourage? Can you give me an example of a time you had a vision of how to grow a credit portfolio, what was the situation, what did you do and what were the results? Have you ever been in a situation where your Credit portfolio was growing asymmetrically to GDP growth, were you able to course correct your strategy in time? Can you give me an example of a time you came up with an idea that increased revenue or reduced a cost? How did you manage the financial crisis? How did you manage the recent Political Crisis in the Middle East? Were you affected by the Japanese crisis? What are the current biggest political risks to your business?CommunicationStyleAs a key member of the senior executiveleadership team it is paramount that the CRO isable to communicate effectively. Their ability tohandle high pressure situations with finesse andbring conflict to swift closure are quintessentialtools of the job. Furthermore as the role isrelatively young as compared with other C – Suitepositions, it is critical that the CRO is able tomentor and effectively champion the necessaryknowledge transfer the organization requires. page 5
  7. 7. Communication StyleSample Questions Can you give me an example of a time you had trouble seeing eye to eye with a co-worker but were still able to maintain positive relations and deliver results? Can you give me an example of a time one of your subordinates did not understand your instructions clearly, how did you change your operating style to communicate with them? How do you take a vision and translate it into operational objectives which can be executed? Tell me about a time when being more aware of what is going on would have helped to solve a problem? Tell me about a time when you envisioned a better outcome and energized others to achieve the desired results? If I were to ask a colleague /subordinate about you, how would they describe you? Describe the last time you lost your temper? What was the situation?LeadershipHeading a department which can literally make The first couple of questions below are a greator break a bank requires leadership. The CRO way to get an idea about someones operatingmust have the gravitas and pedigree to style. Your least favorite person is often yourcommand the respect of the team complimented anti-thesis, for example if you are very punctualby a commanding knowledge of risk and then your co-worker who is notoriously tardycontrols. They are a critical factor in mobilizing will drive you crazy.people to follow a new direction. The CRO mustbe effective at making impactful decisions andintuitively know the vision of the organization. page 6
  8. 8. LeadershipSample Questions Describe your least favorite person on your team? Describe your least favorite person in the company? Describe a time you had to define your Boards risk appetite for them? How did you get the board to become aligned and agree upon a certain risk tolerance? How do you get all divisions to use a standardized risk measurement system? Describe a time you had to re-align the Risk strategy to the companys vision? Can you give me an example of a time you were able to step into a tough situation, give the team direction and deliver positive results? What is the toughest thing about management? What is the purpose of leadership? How would you define a good leader? What is the key to getting people to execute the organizations strategy? What is the biggest reason why strategies do not get executed? As a leader within an organization you must often build support for goals and projects from people who do not report to you and over whom you have no authority. Tell me about a situation in which you demonstrated that you can build the needed support? How do you take a vision from agreement, acceptance, internalization, commitment to results? How would you rate your own leadership skill on a scale of 1 – 10? Whats missing?AnalyticalThinkingThe best CROs are able to see around corners andmitigate risks before they take place. Their abilityto unearth trends and recognize patterns in themarket allow them to stay clear of pit falls andavoid downside risks their competitors fall preyto. The CRO must constantly be analyzing andscanning the organization for new risks. Theyshould have insights most others fail to have andhave an exceptional ability to trouble shootcritical areas in the organization. page 7
  9. 9. Analytical ThinkingSample Questions Tell me about a time when you developed a new approach or offered a new idea that led to the success of a project? Describe a time when you applied your expertise to unearth a trend or pattern in the market place others failed to recognize? Tell me about a time when your initial assessment of a problem was deemed incorrect? How did you figure this out and how did you react? Can you give me an example of a time you declined a proposal which your peers wanted you to approve? What was the situation and over time how did the company perform? Can you give me an example of a time you were able to make predictions about how the market was going to perform? Can you describe a time when you were able to unearth a fraudulent proposal, what was the situation, how did you figure it out, and what was the result?AssessmentSheet SummaryThis paper provides a brief snapshot into the approach and personality.initial interview of a CRO. Generally a full For example asking “what is the toughest thingassessment consists of 5 key areas: about management” actually tells you what the candidates biggest management weakness is. Of course if you ask the candidate what is your Technical/Competency Based Interview biggest weakness they may be reluctant to tell Motivational / Subconscious you what it is. However if they say the toughest Drivers Interview thing about management is aligning the team or dealing with conflict, or letting people go; Case Study you are actually gaining significant insight into Psychometric Test their weaknesses. References Also key in the assessment is not so much whatAs you can see this is a very thorough process the candidate is saying but how they are sayingand requires a professional approach. Many of it. 80% of our communication is non-verbal andthe questions described in this paper provide a the assessment professional must have a keendeep insight into the candidates thinking style, eye for the subconscious clues the candidates page 8
  10. 10. give us. Finally the biggest opportunity to assess an opportunity one should never miss.the candidate is after the interview is over, simply In closing it is difficult to summarize the initialwalk the candidate to their car. Often once the assessment of a C-Suite executive but I hope Icandidate is out of the building they let their have added some structure around the first stepguard down and start acting more naturally. The in a methodical and regimented selectioneffect of having finished the interview and process. Should you require some advice orhaving physically left the building gives them the guidance regarding your own CRO selectionfeeling that the interview is over. They often process, Stanton Chase International would bebegin to speak more casually with you and will delighted to help. Please feel free to contact megive you great insights into their life, personality directly at my address below.and personal goals. This is great information andSincerely,Shane PhillipsMENA Regional Practice LeaderFinancial & Professional Servicess.phillips@stantonchase.com page 9
  11. 11. AboutStanton Chase InternationalStanton Chase International Industrial, Financial, Consumer & Retail,(www.stantonchase.com) is a specialized global Technology, Logistics and Transport, Healthcareexecutive search consultancy firm of first choice & Pharma, and Professional Services. Since itsto multinational companies, offering executive incorporation, our presence in the Middle Eastsearch services globally, with regional knowledge has grown 6 times by gross revenue, and weand local insight. Today, it operates with truly have opened two additional offices in Abuintegrated resources of over 70 offices in 45 Dhabi and Doha.countries. In recent surveys, Stanton Chasecontinues to be ranked among the top 10 Stanton Chase is a member of the Association ofinternational executive search firms by size, Executive Search Consultants (AESC) and westature and reputation. strictly adhere to its ethics and code of conduct. Since 1959, the AESC represents retainedStanton Chase in the UAE was founded in 2006, in executive consulting firms worldwide byorder to assist organizations in identifying and establishing professional and ethical standardsattracting outstanding individuals for senior for its members and providing information tomanagement roles and boards across the Middle the profession, the media, and the public.East region. The office is specialized in SeniorExecutive level appointments in the sectors of page 10
  12. 12. DUBAI, UNITED ARAB EMIRATES Tel: + (971) 4 3693529 Fax: + (971) 4 3604480 Address: Office S06, Block 17, Dubai Knowledge Village, P.O Box 500195 ABU DHABI, UNITED ARAB EMIRATES Address: Bldg.B, Al Mamoura 15th Str., P.O Box 46400Shane PhillipsMENA Regional Practice LeaderFinancial & Professional Servicess.phillips@stantonchase.comTel: (+971) 4 3693529Fax: (+971) 4 3604480 DOHA, QATARDirect: (+971) 4 3693539 Address: L14, Commercialbank Plaza,Mob/Cell: (+971) 50 9407537 P.O.Box: 67678 www.stantonchase.com Visit us on “Risk Middle East” on LinkedIn http://www.linkedin.com/groups?about=&gid=3970497 www.executivenewswire.com

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