The Emergence of the Control Function
Nishtha Sharma
Consultant,
Aon Hewitt
Ankur Saxena
Consultant,
Aon Hewitt
It's been seven years since Lehman Brothers collapsed
and set off a banking crisis that still stifles the global
economy. Today, the banking industry is a lot stronger
than it was, but some critics say efforts to reform banking
regulations have fallen short of their potential. The
2008 banking crisis underscored how vulnerable the
financial sector had become. The regulatory bodies
and governments across the board were finally forced
to take a hard look at the business operations across
banks that were at the epicenter of the collapse.
Since then, the banking industry has witnessed
three significant changes: they have started focusing
on their core business, regulation has been rethought
to make the banking system sounder and safer, and
policymakers are looking to protect their countries'
best interests and are putting up regulatory walls,
thereby restricting the free flow of capital.
In the past five years India has grown into the
global banking operations hub and is playing a key
role in the transformation of banks and responding to
the changes in the ecosystem. The increased scrutiny
of banking operations makes it critical for higher
focus on risk and compliance activities for most banks
in India, as these centers are now responsible for
servicing close to 65% of the global operations.
The Risk Landscape in India
The control function landscape in the country has
undergone a significant change in the past five years.
This evolution has been coupled with a change
in the structure of the risk teams as well. The risk
teams are re-aligning themselves into a three tier
structure. The different tiers could be classified as
a. Tier 1 comprises activities which are repetitive and tend
to take place on a monthly, quarterly or annual basis
b. Tier 2 comprises routine activities which would include
defining criteria that determine if a risk has been
managed or a control operated in line with internal
procedures or external compliance regulations
c. Tier 3 comprises collaborative activities that are
aimed at bringing an organizational or group
perspective to these testing and monitoring activities
The risk roles are also evolving and are slowly
moving to the Tier 3 activities, where the risk functions
are acting as an extension of the front office teams
and supporting them in the entire risk management
activities. Global In-house Centers (GICs) across the
board are traversing this journey and are in different
stages of evolution. The existing team sizes have gone
up by 29% and are expected to further increase this year.
The rate at which the teams are expanding is very
high and organizations are focusing on buying talent
from the market, which has led to increasing challenges
for the HR professionals
The Talent & Rewards Implications for HR
The evolution of the risk functions has been
accompanied with changing expectations and
responsibilities. The expectations from the team
have evolved from being a simple operational
process to providing real-time analytical support to
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