By Ever Obi

Last week, I was contracted by a fintech startup to interview a candidate of theirs. They were looking to hire a substantive Head of Risk Management, to oversee their lending operations. I woke up early in the morning, cutting my much-needed sleep short, to connect online from Katy, Texas.

The candidate in question, with more than 15 years of risk management experience, across six financial institutions, looked solid on paper, his resume well-written and intelligible. While his resume highlighted a dearth of competence in some key risk areas, such as operational and market risk, it showed he was well-grounded in credit risk (the inherent risk in the business of lending). This was good enough for me; the role was, after all, for a lending business. It made sense that the potential head of its risk management team was an expert in credit risk (the most important risk in lending).

But I was wrong. Thoroughly wrong. Undeniably wrong.

I had woken up before 6am, deprived myself of sleep, only to be dealt a disappointing blow by my fellow risk manager. This candidate struggled with every question that I asked, mostly about credit risk. He could not speak to any of the fundamental credit risk indicators; Non-Performing Loan (NPL) ratio and Cost of Risk.  He neither understood nor knew how to measure the credit risk parameters. He knew zilch about operational and market risk, rambling through basic risk definitions. It was apparently pointless to delve into enterprise risk management, risk analytics, IFRS 9 ECL computation and the other abstract and technical areas of risk management.

I wanted to feel bad for him, to empathise with him; it must have been harrowing for him, to sit in an interview and look clueless. I wanted to feel bad for him, but I did not. Instead, I felt bad for Risk Management as a profession. I felt betrayed. This was someone who had known risk management longer than I had. It was an atrocious display, unforgiveable for a credit risk manager to not be able to explain NPL ratio. You can analogize this with an alcoholic that does not drink, with a heart that does not beat. And as Simi sang, what’s a heart without a beat?

But the truth is that I have seen variants of this incident one too many times, from my years of working with and interviewing risk professionals, my years of interacting with younger risk managers.  I have seen people waste their years in this beautiful (but often thankless) profession of risk management. For financial institutions, finding truly competent risk management leaders has become a journey through the eye of a needle. I have attempted to make this journey myself, numerous times, and most times I got exasperated and settled for tolerable managers who at least have the right foundation and are bright and open-minded enough to receive my mentorship as they work with me.

For risk managers like the candidate that broke my heart last week, whose CV pages have already been adorned by bountiful, yet lacklustre, years of experience, I am not sure I have consolatory words. You could make changes, try to improve, but I fear that it is a little too late. Risk management is not a kind profession; your best days are the beginning.  

For the young (and aspiring) risk managers, I have been moved to write this to you. I hope you see this, read it and apply it in your respective careers before it is too late. Below are ten lessons from my risk management voyage, from a fresh-faced, inexperienced graduate trainee in the bank, to the chief risk officer (and later managing director) of one of the leading non-bank financial institutions in Nigeria.

Lesson 1: You must understand the importance of what you do

The first question you need to answer as a risk manager is: what is the point of all this? You need to be able to explain it, not just to yourself, but to the interested layman, in simple ways that make sense to them.

In trying to break down the concept of risk management, it is important to understand what the word ‘risk’ means. Risk is the likelihood that an eventual outcome would deviate from what was expected. Then there is the upside risk (the likelihood that the outcome would be better than the expected) and downside risk (the likelihood that the outcome would be worse than the expected). Risk managers can keep their job simple and say that their it is simply to manage this downside, this risk of loss, to mitigate its likelihood. It is also important to understand the word ‘management’. Management in this instance entails identifying, measuring, monitoring and controlling these risks that might have adverse effects on a business.

For a financial institution, there are numerous forms of risk to be managed, but the main ones are credit risk (the likelihood that a debtor would not be able to repay his loan), market risk (the risk of loss arising from adverse movement in market prices, interest and exchange rates) and operational risk (the risk of loss arising from failure in internal systems, process, people and external factors).

Inadequate risk management is the reason why banks (and other financial institutions) fail. The cases of Silicon Valley Bank, Bank of Elmwood and Heritage Bank, to mention a few, are all due to a failure of risk management.

So, as a risk manager, you can be confident enough to say that your role is to prevent your company from failing, from collapsing – and you would be right! Your job is not to constantly prevent business growth, always veering towards risk-aversion. Your job is to support, educate and guide other stakeholders in the business, to enable them to make more informed decisions.

As a risk manager, your job is not to ensure that the business grows. Your job is to ensure that the business continues growing. You must see the difference, for this will help you understand and appreciate the importance of the shoes you wear.

Lesson 2: Accident or choice, it does not matter

My entry into risk management was a combination of both. I was one of the graduates that Skye Bank (now Polaris) housed in one of their facilities, on Joop Berkhout Avenue in Onireke, Ibadan, for a couple of months. As part of the pre-employment conditions, we were to be schooled, to be allowed to study, away from the distractions of the real world, and to pass about a dozen banking courses before being admitted into their entry level programme. This training was known as the Skye Graduate Intensive Training (SGIT), and I was part of its 31st stream. I ended up graduating from the programme as the overall best student, also bagging awards for the best in 6 of the 11 courses taught: Treasury, International Operations, Compliance & Control, Credit Analysis and Risk Management.  

That was the first time Risk Management came to my consciousness, the first time I developed any interest in it, because it happened to be one of the courses I received an award for. So, I discovered it by accident.

After my graduation from SGIT, after I had spent the mandatory six months of internship getting moved across units in Branch, Domestic and e-Channels Operations, I had the privilege of meeting with Tolu Dayo-Peters, a lady we knew as TDP, the then Head of Recruitment, and she asked that I make a list of five departments of my choice, for my permanent deployment. The only reason I was given this privilege was because I had graduated top of my SGIT class. In my list, I included units I had been in for my internship and units which courses I had received awards for, including Treasury and Risk Management. Risk Management happened to be the first on the list; I believe this was why TDP asked that I be posted there. So, I discovered it by choice. I chose it and TDP decided the course of my career.

It does not matter if risk management came to you by choice or accident. To be good at it, you must accept it and build affinity for it.

Lesson 3: You must be willing to learn

I was posted to a unit in Enterprise Risk Management known as Predictive Analytics. I always like to keep it simple and call it Risk Analytics. There I was, fresh from internship, never used Microsoft Excel for anything meaningful before, right into the most technical unit of risk management, that involved building complex risk models and implementing the requirements of the Basel Accord. Initially, I relied on the lessons of Akanna Okeke, a high-flying and patient Assistant Banking Officer who was on his way out of the bank, traveling to Canada for his masters. I did everything I could to learn as much as possible from Akanna.

Ibrahim Modu Abu was my supervisor. He made me better because he allowed me to do things, gave me tasks that were bigger than me, believed in me. Weeks after I joined, Abu said to me, ‘In compliance with Pillar 1 of the Basel 2 accord, the bank needs to build an EAD model. Go and work on it’.  I had no idea what EAD meant, but I started scouring materials, understanding things for myself and building the model.

Skye Bank provided a solid foundation for my career in risk management, because Abu allowed us to think, to explore and discover things. It was in Skye Bank that I and Lawson Omiunu (my good friend and team member), out of our obsession to learn, spent weekends, dissecting existing risk models, understanding and critiquing their intricate formulas, restructuring them, building new ones. We reconfigured the impairment model from sectorial to transactions based. We conducted stress tests and regression analysis, studying the outputs, the acceptable p-values and goodness of fit, running stepwise analysis to select stronger predictor variables, working on projects with an Indian consultant known as Yogesh Singh who did unbelievable things with Microsoft Excel.

You must be addicted to learning. If the prospect of learning, discovering new things, does not send a flood of dopamine to your brain, then you will not be a successful risk manager. 

Lesson 4: By all means, use people

When I was employed by Access Bank as a credit analyst, I was excited. I have always considered credit analysis as an essential part of credit risk management, won an award for it in SGIT. This role allowed me the chance to conduct financial analysis, to learn how companies across various business sectors functioned. After I reviewed each credit request, I would discuss them with seniors who had taken a liking to me, to get their different perspectives. Mustapha Osenru Mohammed, Chukwuemeka Uzoh and Kenneth Mba; the minds of these men were goldmines and they opened them up to me with shocking generosity. By asking questions, by listening to them, I started to develop the sensitive insight needed for a risk manager.

Experience is the best teacher, but it must not be your own experience. Identify well-grounded senior risk managers around you and tap into their wealth of experience. Ask questions and learn the art of listening. Remember, you will learn more when you are listening than when you are talking. 

Lesson 5: Just get things done

At the beginning of your career, you must be result-oriented. You must be able to get things done. Be diligent, be efficient, be that person that solves problem. Just by having this mentality, your case can be likened to that of a footballer who stays behind after training is over to practise headers and set pieces; he will automatically begin to get better than his teammates.

Enjoy what you do, have fun with it. Risk management might seem like a thankless job, but you must aim to be among the best in it. Pour your heart into it and be exceptional. You will never regret this.

Lesson 6: You must know when to change units

Unfortunately, risk management is broad. Arguably the broadest of all departments in a financial institution. So, this is not that masquerade you observe from one spot. I was lucky; I was redeployed multiple times. My role in Risk Analytics at the start of my career, and my work with ICAAP, made it possible for me to have a good grasp of the other risk areas, asides credit. In Access Bank, I had the opportunity of working as a credit analyst and learning from more experienced people. Then, Adesoji Olasoko, one of the Risk Management Group Heads, engineered my redeployment to a unit called Credit Risk Modelling and Optimization, under Credit Portfolio Management, where he believed I could deliver more value. There, I got to monitor risk assets, to understand the portfolio impact of the movement of risk metrics, sat in meetings every Friday with my team, the business teams and the late Herbert Wigwe, to discuss criticized risk assets. There, I became part of a workstream for a credit risk modelling project in conjunction with Dun & Bradstreet. There, I learnt firsthand what it was like to work with regulators and rating agencies, invaluable experiences. By the time the opportunity came for me to be Head of Risk Management in another financial institution, I had gathered enough experience for this.

I have seen that one of the major problems we have as risk managers is that we spend the bulk of our important years in just one tiny unit. But push for your move at the right time, only when you have mastered your role.

Remember, risk management is not that masquerade you observe from a spot. If you spend most of your areas in one area of it, you will not make a good risk management leader.

Lesson 7: You must remain on a path of constant self-improvement

Ojeifoh Okosun, my mentor of 14 years, would always tell me, ‘It is not when you need a degree that you will acquire it’. Early in my career, I went enrolled into a part-time programme to get my master’s degree in risk management. I continued writing certification exams, no matter how long they took. I also became a member of RIMAN. These personal development efforts have paved the way for my growth in risk management.

Personal development is like an insurance cover for your career. It might look like you do not need these certifications and degrees now, until you miss out on opportunities because you do not have them.  You must be and look like an authority in your field.

Lesson 8: When you are ripe, seek leadership roles

I was in Access Bank when Zedvance (then a startup non-bank financial institution) headhunted me. They wanted me to come onboard as their first ever Head of Risk Management. When I decided to leave Access, a bank convinced that they were on a mission to become the most respected African bank, to join a company that had only been through two full years of operation, I understood how challenging it was going to be. But it was the challenge that attracted me. I felt ready, fortified by all the lessons my experience in the commercial banks had taught me, all those redeployments, all those sleepless nights. My foundation was my confidence.

In Zedvance, I structured the risk management department, developed frameworks, built risk models and credit-decisioning engines. It was interesting to see my work directly improving the business and supporting its massive growth. I grew further, learning to manage people and striking a balance between risk management and business, leading engagements with regulators and external auditors. Then, in the beginning of 2020, my shoe was made even bigger when I was appointed as the managing director.

You must refuse the comfort of being a junior forever. In your formative risk management years, you must spend time improving yourself, doing actual work. Only accept leadership positions when you know you are ready, and when you do, you must shed your rigid risk management skin and find that balance, forged by all the many lessons your work has taught you.

Lesson 9: Be generous with your knowledge

Teach. This is one of the easiest ways to improve, to become a master. Teach younger risk managers, teach business teams, teach finance managers, teach anyone willing to learn. In Access Bank, I volunteered to teach credit risk, breaking down the contents of the bank’s credit policy guide, to entry-level graduates in training school. In other places that I have worked, I have always taught. 

It is not only about taking, give too, teach, be generous with your knowledge. And you shall find that there are important lessons that only teaching can help you access.

Lesson 10: Make ‘risky’ friends

In your circle, have friends who are risk managers. Discuss risk management, speak its language, work and learn together, read and exchange books. You still have the blessings of youth, take advantage of it.