Greater the risk, greater the reward holds as true for the BFSI domain as any other. Playing the balancing game between profitability and risk has become all the more challenging with the rise in economic uncertainty, increased defaults, volatile markets, riskier products being launched, unpredictable consumer behavior and increasing regulatory oversight.
What this has culminated into is a call for more collaboration and co-ordination between the offices of Chief Financial Officer (CFO) - who is charged with assessing the profitability and the Chief Risk Officer (CRO) - who is charged with assessing the risks.
With regulators seeking a unified view of financial and risk data using common and consistent templates, the convergence of data, market and industry research, analytical and modeling tools, and reports across the two functions is inevitable and unquestionably important. This partnership results in giving a boost to efficiencies and reducing costs. Can there be better reasons for the urgency to integrate the two roles?
CFOs and CROs are fighting the same battle and the good news is that leaders in BFSI have acknowledged the need for bringing the two roles closer. This convergence makes it simpler to balance operational and strategic decisions and to protect capital in order to meet the looming threat of business disruption and continuity.
On the other hand, there is a larger pretext of organizations holding on to the staunch belief in the disparity of the two roles: the more independent they are, the better it is for businesses. This school of thought emanates from the fact that these organizational structures and managerial hierarchies were meant to minimize friction between roles. But over the years operational niceties and diverse IT needs have pushed the two away into silo mode of operation.
Today, the evolution in the roles of CFO-CRO as well as the evolution of IT technology at their disposal, has brought us to contemplate the rationalization, unification of systems and workflows. The end result of the exercise should be aimed at improving the quality and consistency of information and reducing the cost to manage and process it.
The re-engineering and unification of data and analytical systems are worth the pain. The impact in doing so is felt across the enterprise. In a sense, the concept of shared services and platforms needs to be extended to areas on either side of the CFO-CRO wall. Many roles and functions within the organization will benefit when the data and analytics being shared is cross-leveraged for operations, risk-management, reporting and strategic decision-making, across all levels.
When the CFO-CRO relationship is strengthened, we can expect to reap the benefits of operational stability, predictability of returns, enhanced reporting, increased compliance and improved profitability. Narrowing the information, communication, process, workflows and systems gap between the two functions go beyond protecting value and, in fact, add tangible business value to organizations.