Why Guidance?


Ten years on from the financial crisis, issues in financial services continue unabated: the misclassification of loans for regulatory capital calculation purposes, employees creating unauthorised bank accounts without their customers knowing, the interest rate rigging scandal, a botched IT upgrade, bank customers scammed by fraudsters who ‘spoofed’ their bank‘s telephone number... the list goes on.  At the heart of these issues, invariably, is inadequate risk oversight and failings in risk management.

Yet, new risks continue to emerge – particularly related to cyber, digital and data with the emergence of blockchain, artificial intelligence and other technologies.  Meanwhile, ‘macro’ risks, too, take on greater proportions – socio-political risks and climate change risks amongst them.

“When I left my previous CRO role, I was interviewed by the regulators and asked what I had felt was missing in undertaking my role. My response was having clear guidance about what a risk function should be doing.”

Chief Risk Officer

“When I took on the role of Risk Committee Chair, I had nothing to tell me what my committee should be doing. The Guidance will be a very valuable yardstick”

Board Risk Committee Chairman

For financial services organisations, the scrutiny from regulators continues to grow, with the FCA due to report later this year whether its remit should be extended to cover a broader set of products and customers, and the Bank of England, along with other central banks, translating commitments to act on climate-related financial risks into concrete action.

Board members remark on the many unexpected and avoidable company failures, and note the very wide variation of risk capabilities between firms they know.  Chief risk officers tell us about the wide-ranging remit that risk functions in financial services can have.  And they all point to the lack of clear and authoritative professional body or regulatory principles-based guidance.

The Risk Guidance Initiative has emerged from this context of considerable change and challenge for risk committees and risk professionals.