Lord Mayor urges UK financial services to invest in risk management

The UK’s financial services need to be investing in risk management roles to maintain the City of London’s competitive edge, the Lord Mayor has warned.

In recent years, the role of Chief Risk Officers (CROs) across the financial sector has evolved from a compliance-focused gatekeeper to a strategic partner in driving growth.

New research from Bayes Business School , which interviewed UK-based CROs, finds that risk managers have shifted from being seen as barriers to growth, to becoming the means to enable it.

As a result, they face an increasing expectation to protect organisations from risks, while unlocking value through calculated risk-taking.

The conclusions are supported by the Lord Mayor, Alderman Alastair King DL, who said: “The strategic management of risk is perhaps the defining capability that will separate leading financial centres from their competitors.”

“We need to reform their attitude to risk and rethink our mindset”, he said. “This research offers invaluable insights into developing the next generation of risk leaders”.

“Firms need to innovate and take responsible risks to sustain the UK’s world-leading financial services sector, and regulators must encourage success alongside preventing failure”, the Lord Mayor continued.

The report coincides with a fresh push from government to encourage more pro-growth policies from regulators, something that will inevitably lead to a recalibration of risk.

Last week the chair of the FCA, Ashley Alder, toldCity AM that his watchdog will put “sustainable growth” at the heart of its strategy over the next five years but cautioned there would need to be “trade-offs” – and an acceptance that changes could lead to more business failures and threats to consumers.

“This will require a bolder approach. We will have to make decisive trade-offs. And we will have to take greater risk,” Alder said.

The Bayes report traced the origins of the Risk role back to the financial crisis in 2008, as well as the implementation of the senior managers and certification regime in 2016, which cemented their place in the boardroom.

The lead author of the report emphasised the growing range of skills required for the position: “The striking message from our discussions was the breadth of expertise needed for the role.

“Effective CROs balance prudence with innovation, fostering growth while protecting organisations from emerging threats”.