Interview with Olivier Beroud, a visiting professor at the London Institute of Banking and Finance

This is a transcription of our interview with Olivier Beroud, a visiting professor at the London Institute of Banking and Finance

You can watch the original video interview via the following link 

Boris: Welcome to our Interview with Olivier Beroud. Olivier is a visiting professor at the London Institute of Banking in Finance and he advises a number of UK pension funds. He's a senior advisor and board member on a variety of organizations in the rating, Trade Finance and charity sector. Olivier specializes in Governance Risk and pension advisory, as well as training on topics such as credit ratings and the rating systems, corporate finance, corporate governance, and financial analysis.

Olivier also runs his own Leadership Governance Risk and pension advisors, training and coaching firm all the way we are. Thank you for coming in to our interview today.

Olivier: Thank you, Boris. Very nice to be here with you

Boris: Today we will review how 2020 changed what we do in Risk Management and Governance and what are themes emerging in 2021. Olivier can you tell us a little bit what you and your colleagues at London Institute of Banking and Finance have been up to recently?

Olivier: Yes, of course. Thanks for this. 2020 has been an interesting year in many ways. The themes that we had to cover in 2020 changed radically when we started to see the impact of the pandemic. We talked about Governance Risk and regulation, but we talked about it in a different way. We all learned a lot about these aspects in a 2020.

And we had a number of ongoing training course capacity building programs, which had to be adapted in two ways and one for the content and two for the delivery method that COVID forced us to adapt to. So perhaps if you want to, I can talk to you about the content and then we will talk about the delivery methods and somehow that are linked because the delivery method being, of course the distance learning.

This kind of medium that we are talking today also has an quite a lot of implications and consequences in terms of managing Risks, Governance and Regulation.

So, it's really much linked, but to talk about the content, to start with, we had, for example, a large program in capacity building in Tunisia were we were planning to talk about the usual aspects of Governance in large banks and, and so forth. And that had to be halted and adapted in a quite a quick fashion to talk about how to manage, how to adapt Governance in a crisis.

Do you want to be surprised to hear the impact of COVID and how boards should be reacting? And so we had to dig deep into our own pool of colleagues and specialists to find out what was going on here in the UK or in France or other countries where we have, a specialist on a sort of a panel of academics. And then I'm very humbly bring this to conversations with boards elsewhere, be it in Tunisia, Malaysia or Bahrain, Singapore, just to say a few.

And this was very much as I said, a humble conversation because we were ourselves trying to figure out what we were doing here, how we were trying to adapt. And of course, then trying to see how that may or may not be relevant for the people we're talking to and that experiences in their own markets. I can't say I think that the UK or France or Europe in general has been particularly effective at dealing with the COVID 19 crisis.

So we also learned a lot from colleagues in Asia who have, of course been much more, much better prepared and much more efficient at dealing with this. But of course the fact that the crisis is international and affects all the players means that some of the features are common to all banks and all the boards. So maybe I'll stop there and let you let it come in with a more specific question, if you want to do it.

Boris: Yeah. So based on your experience, what are the key risk areas boards and the managers are worried about and what they want more training on?

Olivier: Yes, so what does COVID mean for you and how you dealing with it? We came to identify a number of very specific areas where people were particularly worried. Obviously the first one is that a lot of people talk about it as if it's a Black Swan. We know it's not a black Swan because, we can see the videos from among others, a illustrious former head of Microsoft Bill Gates telling us about this a few years ago.

So we had a black Swan is something that is not expected, this was expected, but we weren't prepared for it. And so aspects of managing a bank where you cannot access your headquarters, the operational risk aspect and the health aspect, and the tests, that have been on things that we always talked about, but never really tested in a very deep manner.

Things like succession planning, key man risk, how many people do you have in your Risk department in case, for example, if two or three of the key individuals are out, and they cannot be contacted because they are sick or because they have to isolate or, well, if you have to isolate, but can't be contacted via a zoom or over sort of a video.

So the business continuity planning, anything to do with operational risk, initially, that was the main focus. As people started to realize that they would have to do this for quite a long time, boards and senior management attention started to move from just that, to the remote team management aspects, remote team motivation, remote team IT security, even mental health and a wellbeing of colleagues, who are isolated, fearful, etc.

So you had a sort of evolution from the operational Risk to the teams, but also on the fabric of the bank access to files, ability to actually deliver services. And what was really interesting for example, was that a lot of banks of course, had been outsourcing services. And in the logistical chain of bank services, there's a lot of things are not actually delivered by banks, be it security checks, or delivery of new cards.

And of course, banks may have had themselves a business continuity plan in place, the way they may have had a good succession planning, but I'm not sure how much they checked that the suppliers also had these things in place. Certainly, maybe not to the same extent. If they'd done their homework well, they’d insisted that their suppliers also done their homework well, and that become a major concern for banks and also for the customers and their clients.

Boris: Do you have may be some case studies or examples on what's something your team have recently achieved that you are really proud of for, maybe not name some names, but perhaps give us some examples of how people should proceed.

Olivier: Well, a few things come to mind, hopefully they will sound good to you too. One thing we were very proud of is that we have a large capacity building program that we were planning to travel and deliver face to face. And within one month we transformed that into an online capacity building. And that's where it linked to the second point about the delivery mechanism.

Many of our trainers like to stand in front of course participants of the program and have an exchange. We had to re-learn how to train. We had to learn how to use not only a video training, but also we had to think about the structure, the number of hours that people can focus, what they need to do in terms of preparing for a lecture, preparing for a session, how much interaction and how much sharing of documents, ongoing sharing of videos, using the videos, so we had to sort of restructure the way we deliver training.

We had to train all our trainers before we could deliver a training. We trained not only London advice-based trainers, but also trainers based in the various countries where we were working with them. And usually, you meet with them the day before, you have a session with them, you agree what you're going to do, and then just roll with it.

Now you have to be a lot more structured. You have to be a lot more organized. And frankly, I think the quality went up! And I think, maybe some of the old things that you thought went up to scratch, we we've had an opportunity to iron this stuff out.

We've had an opportunity to have a discussion about standing there and delivering 200 slides in one day, isn't a good way to deliver training anymore. It never was, but now it's obvious and we can’t do it. So we have to be a lot more inventive,

Boris: Especially I I've been myself a trainer and I know that there was difficult to engage a life class. But now, in the virtual setting, when you can pull all information from your mobile device with kids and dogs in the the room, so it might be even more difficult. So do you have some best practices on how to solve this?

Olivier: I think that at the end of 2020, I'm just about ready to make suggestions to our partners as to how we should improve in 2021 on what we've done in 2020. We will have such a conversation tomorrow morning, actually with our partners in Malaysia, for example. And one thing we've been discussing is the fact that we needed to be a lot more up front with the participants to any training program where, it's always true that you only get out what you put in, but with the online delivery that has become really apparent.

So you could just attend two to three hour sessions. And as you said, check the emails while you're listening vaguely to what's going on. And after five or six training sessions, you've really got nothing out of it. Whereas if you prepare, do the reading of the case studies, if you actually enter into a pre-session thinking, and we have to structure the way in which we ask people to do this, and then afterwards you have to continue and you have to possibly ask them to do a little tests to make sure they followed all.

So, you've got to really make sure that the structure of your training engages not just during the session, but before and after. And the other thing I would say is use interactions between the people who are being trained, a lot of the personal interaction that makes the value of a training, especially if it's an open course, when you meet people that you didn't know before. In a way that is lost when you attend a session on a video, because as soon as it’s finished, you go on and you are no longer in the same room, we don't have a coffee, don't have a lunch, et cetera.

So creating a lot of discussions in groups of people, either one, a two or three people, et cetera, and asking them to do a learning journal and exchange information about the experience pre, during and after. All this really contributes to recreating the exchanges and the wealth of human exchange that normally happens at a training course or at the conference that cannot be done very naturally in the virtual settings. It has to be structured, tt has to be thought through.

It has to be a bit like a theater playwright. In order to look natural, you got to do a huge amount of work. You can't just stand up and deliver what we used to. You have to prepare and be a lot more structured in order to look and feel natural.

Boris: Is it related to the concept of breakout rooms that allows a few people to join a special kind of forum?

Olivier: Precisely. A breakout room also encourage people to connect before have conversations, exchange on topics that will be covered or have been covered and come back with their own thoughts. Again, I think, one of the main theme of anything we've done in 2020 is the fact that we need to be a very humble. I mean, it is really humbling to be at the end of 2020 and be in a situation that is even sort of worse than, when we first started. In the UK right now, where I'm sitting, we are isolated because of this new strand of the virus.

So the virus has once again, thrown something at us that we did not expect, and that will have implications that we are going to have to think through. We really have to remain in a mode where we are exchanging and, and discussing things with people around the world.

Boris: Let's discuss what are the themes emerging in next year in 2021. Hopefully, an upcoming vaccination and the lots of people becoming vacinating, we will not have the same discussion next year in the same period.

But what are the traditional topics, or perhaps what are the topics that re-emaged, or topics that are completely new from your perspective?

Olivier: Yes. That's a very good question. I think you are right to highlight that some traditional topics are coming back. If you take them in sort of Governance Risk and Regulation order, on Governance, I think it's again continuing to adapt to this new normal and making sure that operational risk remains a very high and intensely scrutinized topic.

I think that that's true for both boards and regulators. I expect that regulatory bodies are going to maybe not entirely discover operational risk, but put it much higher on their agenda and stress testing would be required, and the evidence and the depth of stress testing I think will change radically.

I think we've learned a lot about that and regulators also have learned an awful lot about that but adapting Governance to the new normal also means taking into account the new way of dealing with themes that are not necessarily “meeting”.

As we discussed before about the new challenges of being working from home for members of the team, the ways of motivating teams and we see the emergence of a concern about efficiency. Is it that the same ability to get teams to be as productive when they're not working together in the office? I mean there is something to be said for all being in a room and having the boss there and overseeing.

So how do managers learn how to motivate their teams and to step into this brand new world of managing by objective, et cetera, that everyone is always talking about, but now you actually have to do it again. And maybe with the new technology you have the means to do it, but managers are not used to doing so. So that's something that Boards has to be themselves very cognizant.

Things like mental health in the UK. We've talked a lot about mental health in the last few years, but I'm sure it's the same in other markets, but what are you actually doing about this and how are you supporting your staff?

What are the new KPIs? What are the new key performance indicators that you use in order to monitor this stuff that can be effective from the board's perspective? So that's from a few examples of Governance agenda items, perhaps.

On Risk, I think the old non-performing loan topic is coming back, we've delivered already a couple of these to boards. I was in the last crisis at Barclays bank and I saw how we had to retrain the front line, the, the commercial teams first line of defense.

Well, when you move on through the crisis, that first line of defense has to do things differently. You have to have different conversations with their customers, their clients, they need to have a very different training and different capabilities. So that's very important. The credit teams themselves, it's not the same to be looking at a credit in normal circumstances and looking at a company that is already in trouble. And what do you do then? And this sort of a restructuring teams have to be rebuilt.

A lot of them whether in 2007, eight, nine, 10 years on where are these people, where are they still in the business? Are they moved on, have they retired? How many do we need to hire, retrain or take on from outside? What else? I'm just trying to think of the operational risks and cyber. That's a theme that comes back time and time again.

I think we all are a bit shocked by how quickly people were able to adapt. And I think there's a great quote from the lady who's the CFO of one of the big three car manufacturers. She had a three-year plan for 25% of her staff to be working from home. And then she had 95% of her staff working from home overnight, and she was amazed how it was possible. So we had to be very grateful but somehow just as a delayed consequence of stress on the economy that is not yet a apparent.

I think, the working from home, there was a relief that it was possible at all, but I think increased risks that are there which we haven't thought of yet are going to come through and going to have consequences in 2021. And cyber, I think is one of them.

Now in terms of positive trends, when we carried out capacity training programs in various countries, we went out and interviewed CEOs of large banks that are particularly dynamic.

And the CEOs we talked to said, okay, we need to keep on top of all these risks we've just talked about, but there is an amazing opportunity to really make a difference on the digital side and on the green agenda side. So on the digital side, first, what they're seeing is, I take my mother as an example. My mother who is in her seventies has had to make online payments for the first time doing COVID. She's now using the card that you can pay without touching, she is doing things that she knew could be done, but she was clearly not going to do, but then COVID made her have to take that step.

So, there you are in a way, that's the generation with the savings, the generation with a traditionally a different approach to innovation, and even they’ve had to really accept a new way of delivering financial services. And of course, she's worried about risks, she's worried about cyber.

So banks have to adapt to that, they have to have a conversation with grandmothers and grandfathers about this sort of things. That's just perhaps a very personal example, but I think it illustrates the requirements and the needs that the clients have, and that the banks have to be ready to fulfill.

If a bank can have a conversation with this kind of customers and reassure them that they're services are safe then there will be a much higher trust. And I think when the fog of COVID dissipates, it is quite likely in my view that some banks will have progressed very, very fast compared to others who are struggling to just manage the Risk consequences and will have perhaps had less time and energy to dedicate, to capturing the opportunities on the digital side, for example.

And on the green side, if I may, there is clearly a desire to direct, especially government support and funding towards a new green economy and new industries.

Again, banks are having the opportunity now to support the companys and the operations that are going to be at the forefront of the green and this trend is accelerating. So, banks that are capable of assessing and making the differentiation between what is known as greenwashing and the real situations where this is making a difference to the objectives of the Paris agreement, for example.

And so, again, a lot of preparation had been done before COVID, but because of the focus on supporting, particularly in industries that are going to help the financial institutions that were already well versed into making these judgements and assessments, I think will be able to make a real difference compared to their competitors.

Boris: When you talked about your mother, I remember my mother. She is almost 90 and she has difficulties in moving the outside of the house and she has to do some bank in operations. And it was very difficult to arrange for her online access but now she's trying to do some online banking operations.

Oliver, I would like to ak your personal opinion. What is the one commonly held belief as it relates to risk management or Governance that you are personally disagree with.

Olivier: Okay, I think, maybe it's the idea that technology is changing the way we assess Risk radically. I think technology increases the speed and the scale at which we can do that, but I don't think it changes the way in which we assess Risk radically, or at least I am not convinced yet, for example, on the credit side that we have got things that enable us to do things very differently than I used to when I started 30 years ago.

In other words, understanding what your counterparty does, knowing the people and knowing the credentials and the values. So I think technology is an amazing enabler, but it hasn't changed radically the way we assess risk. I'm happy to be proved wrong there. And I'd love to hear in comments and people telling me how I can't see that yet.

And I'm sure it will come, but at the moment, I'm still on the doubting camp.

Boris: So maybe one more personal question, Because, you are working with people from other countries, from many organizations and you perhaps have a helicopter view. What is one thing, risk management, from your opinion, should stop doing right now that they are doing and the other way around, what is the one thing that they should start doing that that are not?

Olivier: I don't know if many are doing this, but I think people should not think that COVID and this crisis is going to be over anytime soon. I think thinking that a vaccine is going to mean that in 2021 is just going to be radically different to 2020 or much better. I think that's not likely at all. I think 2021 is probably going to be just as difficult from a COVID adapting to this new real, but also we will start to have the impact on the credit portfolios and the non-performing loans and, stress and tiredness from the teams that are working remotely, that is all going to start to increase the burden and make things even more difficult.

So I think in 2021, we needed to really keep fit and very well. To use a very corny phrase, agile in 2021, to make sure that we are fit enough to deal with the challenges that are coming our way.

Boris: Fantastic. Olivier, is there something that I forgot to ask you and you would like to add?

Olivier: I think you've asked a lot of good questions and we've covered a lot of things, perhaps a little superfisially, but any of these topics could be the subject of an in depth discussions, of course, happy to have this at another time, but thank you very much.

Boris: Thank you for your time. I know that you have a difficult time in the UK, and I hope we have a next interview in the more pleasant time.

Olivier: Thank you so much, have a good day, have a good Christmas and New Year year. Bye-bye.


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