A New Job for Risk Managers: Driving Profits

Daniel Melo has posted additional thoughts about The Profitability Paradox on BankThink, the American Banker blog. Here’s an excerpt:

“This profitability paradox has created a new role for risk managers. Retail bank risk managers have not traditionally had to think much about capital management, but that is changing. Under regulatory and market pressures, many banks are now requiring risk managers to take into consideration how much capital is available for lending and what the return will be. At the same time, the more progressive banks are exploring ways to refine and optimize every operational decision to produce higher returns on risk-weighted assets and equity, which demands a different kind of risk manager.

“Risk managers are also being tasked with driving growth, a role typically taken by marketing or portfolio managers. In the go-go years before the recession, risk managers were often ignored or were looked upon as naysayers. Now, risk officers are gaining greater importance and are being asked to support (and even enable) capital directives and to shoulder the burden of profitability management.”