Risk transformation

The problem

Our client, a large bank had invested significant time, effort and resources in uplifting its risk management framework over a period of 18 months, including building out its risk capability in dedicated Line 1 roles. Policies, processes and people all received significant boosts. But despite the program of work that had been undertaken, there hadn’t been any real observable shifts in the way things were done. An internal audit risk culture review was undertaken and while it summarised some known issues with accountability and risk ownership it didn’t generate new insight – let alone change.

The leaders of the Risk and People functions saw an opportunity to leverage the self-assessment of governance, culture and accountability as an opportunity to really get below the surface and understand why they weren’t seeing any change, despite their best efforts.

The outcomes

Rhizome conducted an independent assessment, revealing the cultural characteristics that drive decision-making and how these also created risk. It illustrated at root cause why similar issues continued to observed across the business, and were leading to sub-optimal outcomes for customers.

We partnered closely with the leadership team in our reporting and feedback phase, with both 1:1 individual sessions and group workshops. For the first time, the executive team had insight in to what was behind the inability to change, why these patterns arose and a clear and direct link to the outcomes and risks. This generated the ‘light bulb’ moment to galvanise the team and, using their knowledge of the drivers, the platform from which to drive sustained change.

The assessment and supporting action planning phase has subsequently formed the basis for key pillars of the business beyond risk management, and is used to inform planning across areas such as strategy and leadership. At each planning day, the executive team re-visit the assessment and use it as a means to truly hold themselves to account. The bank now has the mechanisms to truly embed risk management and is moving from process-focused box-ticking to proactive risk management.

Independent review and framework design

The problem

A start-up organisation had experienced rapid growth and strong performance in its core business, validating its strategy and competitive advantage. The leadership team placed culture at the core of the business, strategy; but not ones to rest on the success of the past, they knew a robust, evidence-based approach to culture was critical to their accountability and vision. While things were going to plan and there were no obvious risk management challenges, the leadership team was keen to ensure that their view of the world was subject to independent validation.

Rhizome was engaged to undertake an independent review and develop an approach that enabled the organisation to take a data-based approach to managing its culture – and the outcomes of it – going forward.

The outcomes

The independent assessment identified the behavioural drivers underpinning the business success to date and critically, some of the emerging patterns that warranted attention and action. The work crystallised the practices and thought patterns that shape how people make decisions about what risk they’re prepared to take including how the enterprise-level risk appetite was interpreted in day-to-day business decisions – and the risks that existed as a result. It also revealed challenges (and their drivers) in the interactions between different teams within the organisation that were impeding decision-making and the effectiveness with which strategic objectives were being met.  It provided a vocabulary for the leadership team to call out the characteristics in action and ensure they weren’t falling into habits that created blindspots. 

Using these insights, we developed a supporting framework for the organisation to support its own ongoing assessment of risk culture. Matched with the depth of insight provided by the assessment, this provided the leadership team with a flexible, risk-based approach, backed by evidence points, to target its attention to the areas that needed it most.

The outcomes of this work have reduced direct and indirect costs, with less misdirected resources, opportunity costs and enhanced delivery of strategic priorities, particularly through better collaboration and decision-making. The organisation able to leverage its strengths and double-down, resulting in performance that far surpasses its competitors (even during COVID). Equipped with deep understanding of where its risk management challenges lie, the leadership team has also been able to ‘course-correct’ in some areas and proactively manage their risks across the enterprise. 

Building risk culture understanding

The problem

A regulated company had experienced significant regulatory scrutiny, following poor customer outcomes and ongoing risk management challenges. To support the considerable program of work to uplift risk management maturity and rebuild credibility with regulators, the CEO and Board knew that change at root cause was required.

The outcomes

We worked directly with the CEO, Board and Risk team to surface the drivers for the ongoing issues and provide a better platform for embedding the targeted approach to managing risk. This included a program of work at the Board  and executive committee level to drive an aligned understanding of culture, risk behaviours and risk outcomes and provide a framework for shifting to the desired state.

The insight in to cultural drivers and development of a framework that is proportionate to the nature and complexity of the business has empowered the Board and executive team to truly own its culture. The approach is robust, evidence-based and prompts the discussions that are critical to effective decision-making. Importantly, the team has also been able to rebuild credibility with regulators, with a systematic and robust approach to managing risk culture and risk management.

Credit risk strategy – managing COVID loans and distressed borrowers

The problem

Rhizome was engaged by a large mortgage lender to provide strategic credit risk and regulatory advice to its risk management function regarding its program of work to manage customers that were adversely impacted by the COVID-19 pandemic. The lender felt that it was not adequately prepared to handle the volume of loan deferrals and meet regulatory expectations as risk management capability and resourcing were constrained. The Executive team was also keen to ensure that they were taking a proactive approach, considering risks on the horizon not just dealing with the immediate issues. The risks of adverse impacts on customers, shareholders and staff was high. The impact of getting it wrong ranged from disgruntled customers through to additional regulatory supervision and potential enforcement action, and poor shareholder returns.

The outcomes

Rhizome hit the ground running, and within a short period of time delivered a strategy for the program. Rhizome’s unparalleled regulatory experience, combined with expert risk specialisation, meant that the program progressed at a far faster pace than could be achieved with internal resources. This meant that within a short window Rhizome:

  • Identified credit risk and portfolio tasks that were not providing additional insights and were consuming time and resources which could be better allocated to key credit risk consideration / decision points that were approaching. This enabled the lender to “catch up” in its preparations for all loan deferrals that needed credit assessments at the end of the deferral period.
  • Provided confidence to the Executive team about the approaches and decisions made in preparation for the large volume of loans requiring re-assessment.
  • Provided a quick health check on progress against our industry knowledge of the status at other banks preparing for the volume of loan deferrals requiring assessments at the end of the 6-month deferral.
  • Identified key opportunities to assist the lender’s customers in a more meaningful way (rather than providing further extensions) by utilising the regulatory capital concession provided by APRA and the accounting standards bodies. This strategy ensured that customers would be able to service obligations especially as they came out of deferral and in to the future without incurring additional regulatory capital, nor reporting additional arrears, impaired and restructured facilities.

Rhizome’s approach delivered sustainable outcomes for the lender’s customers particularly those that were expected to continue to experience stress post-expiry of the loan deferral period.