There is a saying in Bali: the cure for anything is saltwater—sweat, tears or the sea. This analogy seemed fitting at our recent APAC CRO forum, as I discussed key issues with Asia’s leading chief risk officers at a resort that overlooked the inviting Java Sea.
At a panel discussion I hosted, an Australian attendee stated that today’s CRO needs to be “part lawyer, part risk manager and part product manager to succeed.” Clearly, the role of the CRO has gone from corporate policemen to something far more operational in nature.
An Indian delegate agreed, saying that he felt his role had changed dramatically over the past few years. Especially important for him was speeding up the ability of the organization to react—for instance, to the rapid depreciation of the rupee or inflationary pressures that altered his market.
Not surprisingly, all attendees agreed on the renewed focus on growth in 2014. Asia has been focused on this for some time, as other parts of the world have been on an extended growth hiatus.
Everyone agreed that the origination of new loans and customers is also critical. The caveat is that this has to be done with increasing caution in many countries. In the wake of the 2008 financial crisis, regulators are pushing banks to make risk a higher priority and increase consumer protections.
A great example came from an Australian delegate, who explained the impact of the NCCPA (National Consumer Credit Protection Act) in making a fairer credit environment for consumers. Australia is also introducing conduct risk measures to ensure banks are making reasonable enquiries about a customer’s circumstances before extending loans to them.
This is making lending a complex business. It’s enough to make a CRO cry, really.
The new order across the region requires a rethink on how products are designed and how business models are put together. Old standards are being brushed aside. Commission-based selling, for example, has been banned in Australia, Singapore and India. Transparency and regulation are here to stay.
So how can a bank stay competitive within these new guidelines? Building an information advantage is an obvious place to start. The cure for many of these challenges lies in the sea of information flowing in the bank’s front door and then using analytics to help grow profitability. So you see, the cure for anything really does lie in sweat, tears or the sea—the Balinese were right!