Building optimal risk and compliance teams

By Elisabeth A. Wilson

Since the onset of the COVID-19 pandemic and the series of resultant existential, economic and societal crises, financial institutions are relying more than ever on their risk and compliance teammates. As governments, societies and companies evaluate the still-emanating shockwaves of the pandemic, myriad emerging threats stemming from climate change, geopolitical destabilization, rapidly transitioning technology and enigmatic cryptocurrencies are heralding that even greater challenges lie ahead. Increasingly, it is essential to have strong risk and compliance teams in place to help financial institutions navigate safely through these uncertainties.

Recruiting challenges

Prior to the pandemic, financial institutions struggled with hiring risk and compliance professionals. The lack of formal collegiate programs focused on risk and compliance roles was compounded by the less-than-glamorous nature of these jobs. While risk and compliance employees are essential to help curb risk exposures and drive alignment with regulatory expectations, this does not stop them from often being perceived as the Debbie Downers of the corporate world. Though risk and compliance professionals are, just like their fellow revenue-producing teammates, invested in ensuring an institution’s financial and reputational success, their job is to recommend that this be achieved prudently with an appropriate balance of risk and reward. Successful risk and compliance professionals therefore require diplomacy and a lot of tact—not to mention very thick skin.

Now, couple these pre-COVID recruiting challenges with our current reality. After the tumultuous and ever-increasing stress of the last two years, an unprecedented number of Americans are experiencing burnout. Resulting reevaluation of personal and professional commitments has partially translated general dissatisfaction into the so-called Great Resignation. While it is predicted that unparalleled teammate turnover will likely slow later in 2022, talent risk is still very real for financial institutions. If this threat localizes in the risk and compliance departments, where sourcing strong talent is already a struggle, this is where banks may face very serious implications.

Targeting talent—externally and internally

Today, risk and compliance professionals must not only stay abreast of furiously escalating emerging risks and rapidly maturing regulatory expectations, but they must display a level of expertise in myriad complex (and often nebulous) subjects such as ESG, climate change, cryptocurrency, artificial intelligence, technology vulnerabilities and third-party risk management. Financial institutions—especially midsize and regional companies—may not have talent immediately in seat to help answer the many questions these evolving topics may present.

Targeting essential rather than desired talent may be the best approach for many institutions. Ideally, having risk and compliance teams comprised of leading experts with top-tier academic credentials is ideal, but it may not be feasible in the long run. Instead, institutions may choose to recruit (and pay top dollar for) only the skillsets that will be fundamental to maturing risk and control programs in key directions in the coming years. Expertise to drive scenario analysis and modeling may be necessary to mature assessment of climate change-related risks, depending on how climate risk supervision evolves. Cryptocurrency is its own, almost-indecipherable language, and talent will be needed to translate it appropriately to the board. Artificial intelligence and technology exposures will require specialized expertise, especially as global warfronts shift from physical altercations and espionage to cyber-attacks and financial sanctions.

Onboarding this talent and familiarizing new recruits with company culture and hierarchies however will take time, which, in light of rapidly advancing regulatory expectations, is an unrealistic luxury. This is where a two-pronged approach may be helpful—while institutions are searching for unique skillsets from outside the company, they can be sourcing talent currently within the company to reinforce the foundations of their current risk and compliance teams.

Sometimes teammates embody the foundational technical skills needed to build up to specialized levels of expertise. Hedging risk and reinforcing control infrastructures can be intuitive. Do you have a manager who recently led a significant project, quite naturally reducing exposures and enhancing governance? You may want to consider recruiting this person to your risk or compliance teams. When their innate understanding of the business is matched against teammates with more tailored, specific roles, both balance and purpose can be simultaneously achieved. External and internal recruits will have their own areas of expertise and their own contributing leadership, which will help propel risk and compliance teams forward faster.

Gain, but also retain

When it comes to recruiting and retaining risk and compliance professionals, the Great Resignation has reinforced focus on some of the basic fundamentals. Events of the last two years have shifted workers’ perspective of what they truly value in the workplace. With the pandemic starkly highlighting our mortality, work-life balance and remote work options have come to the forefront of employees’ priorities. The unprecedented social unrest in 2020 has highlighted diversity, equity and inclusion issues as a key hiring point—job hunters want to work for institutions that value diversity and reflect the communities around them. Rising inflation emphasizes the need for higher, more lucrative salaries. Financial institutions should weigh the value they put on safety and soundness and recompense their risk and compliance professionals appropriately. Crafting an enticing work environment with these key elements will be necessary for financial institutions to remain competitive and attractive employers—for both prospective recruits and current teammates.

Risk and compliance professionals, with their eye for identifying exposures and their ability to interpret complex challenges, are singularly suited to the fight ahead. We have entered a destabilized, uncertain era, and it will take unique mindsets and skillsets to help safeguard our financial institutions. While risks are emerging on all sides, so are opportunities—to drive foundational mitigation strategies, to contribute to developing regulatory guidance, to create stronger, sounder institutions. Purpose is a powerful motivator, especially in a time when the Great Resignation is causing all of us to reflect on our goals and values. Reminding risk and control professionals—current employees, newly promoted teammates and potential recruits—of their essential purpose and valuing them appropriately for their unique contributions will be essential to safeguarding, not only financial institutions, but our broader economy.

Elisabeth A. Wilson is AVP and operational risk manager at Atlantic Union Bank, a $20 billion regional bank based in Ruther Glen, Virginia. She has contributed to the RMA Journal and Risk Management magazine. All views expressed in this article are her own and do not represent the opinions of any entity that she may be associated with.