Tomorrow's retail risk manager

RMA Journal, The, Sept, 2004 by Phillip Britt

As banks become larger, the focus and training for retail risk managers become more specialized around specific products and services like indirect auto lending, credit cards, etc. Yet the future senior-level risk executive needs to be more of a generalist to successfully oversee several areas of risk. Bank executives, risk managers, and trainers discussed how they see the risk environment and the necessary training for the risk manager of the future.

Discount brokerage, insurance, and pension plans are but a few of the specialized areas developing in retail risk over the past few years. So it's no surprise that risk and training experts urge employees to develop a broader range of knowledge through various courses and on-the-job experience. This is the only path to becoming the true retail risk manager of the future.

Both formal and informal sources are needed to augment specialized skills. At many banks, risk professionals will begin to specialize in a particular area as they move up the corporate ladder. However, after a certain level, those same risk managers will need to know the nuances of other areas of risk. For example, a banker may rise to the level of indirect auto lending, then to manager of indirect lending, and then to manager of lending. While there are many similarities for risk management in those positions, there are differences as well. The manager of indirect lending might need to know very little about local housing trends, while that would be important information for the senior manager of lending. Failure to understand those differences also means more potential risk for the bank as the retail risk manager takes responsibility for larger portfolios as he or she advances in the organization.

Contributing to the training challenge is the growing burden of compliance as the government passes laws seeking to protect current and prospective bank customers (e.g., HMDA, CRA), to ensure proper governance (e.g., FDICIA, Sarbanes-Oxley), and to enlist financial institutions' assistance in the war on terror (e.g., the Patriot Act).

Needed: Breadth of Experience and Knowledge

While many banks espouse the benefits of an expanded knowledge base, several are only paying lip service to the concept, according to John Nuzum, former senior credit executive for JP Morgan Chase. "The banking business has evolved into something that is very compartmentalized," he says.

According to Nuzum, too many banks concern themselves with short-term training needs other than using a long-term focus, so training is similarly narrow in focus. But this limits the pool of senior risk management prospects.

While specialization is becoming more commonplace as financial institutions seek to hone their different lines of business, some of the nation's largest banks seek to develop their credit managers' prospects early and throughout their careers.

Wachovia Corp. ($411 billion), Winston-Salem, N.C., seeks out young management prospects through its internship and associate programs, which train top college students and recent college graduates on the basics of risk business and risk management.

Wachovia also attempts to identify potential future managers among the bank's 2,500 risk department employees. The risk function and training used to be handled via the different lines of business. Wachovia centralized the risk department and training following the merger with First Union in 2001.

Wachovia's risk management prospects now enter the bank's development program, consisting of core and professional training. The core training includes various aspects of risk management, including basics like cash flow, that are applicable to all lines of business, as well as professional/managerial development skills that Wachovia officials believe are needed to progress in the bank.

"What enticed me to come here [from a competitor] is that training is highly valued at Wachovia; it has a strong performance management culture," says Gieselle Poveromo, Wachovia manager of learning for the risk management group.

Wachovia was named by Training Magazine as No. 27 on the list of best corporations in America for developing human capital.

Poveromo, who started with Wachovia in mid-2003, created a risk management advisory council that includes representatives from each of the 12 different risk groups (e.g., mortgages, credit cards, etc.) within the bank. Council members advise Poveromo on the operational and compliance training needs for each of their respective areas. By 2005-06, Poveromo expects to launch a training program customized on the knowledge, skills, and abilities of bankers in each of Wachovia's risk areas.

Beyond the bank's scheduled training curriculum, enterprising employees can access Wachovia Learning Connection, the bank's proprietary online training program, for courses in credit, management, sales, and other areas. Executives can access the training records to see which courses a risk management prospect or other employee has successfully completed.