By Mary Tuuk
Most of us are very familiar with principles such as setting a positive example, working constructively with others, treating others with dignity and respect and taking responsibility for our actions. These principles are integrated into our Christian faith and have been emphasized throughout our faith journeys. However, these principles also have very real meaning in the context of the economic crisis we have experienced.
As the chief risk officer for a regional bank, I have been deeply immersed in the economic crisis and its resulting effects on the banking industry. One of the early observations made by regulators and bank leaders alike was that institutions with strong “risk cultures” fared far better in the crisis than their peer institutions without strong risk cultures, notwithstanding varying investment levels in staffing resources, technology, models and analytics.
Key components of a strong risk culture are “setting the tone at the top” and ensuring that decision making occurs in a collaborative fashion within an environment that encourages open debate without suppression of bad news. Those components are supported by the core values of treating others with dignity and respect. One sign of a strong risk culture is that the company’s core values are universally understood by employees and that “doing the right thing” for shareholders, customers and communities is paramount. A strong risk culture encourages growth that is profitable and sustainable, so that short-term and long-term objectives are appropriately balanced. Each employee of the company feels accountable and empowered to drive the risk culture of the company.
Those tenets are applicable to the crisis as a whole, as various constituencies in the crisis—from Wall Street to Main Street to Washington D.C.—took leading roles. Over the years, isolated constituency decisions, debate between constituencies that was not constructive or effective, a lack of clear understanding and accountability between constituencies for outcomes, and an inappropriate focus on short-term results became root causes of the crisis.
We should not then be surprised at the results that unfolded across the globe. Although the economic crisis is complex at many levels, it can also be dissected to reveal some basic principles that were violated. These are principles by which we as Christians choose to live our everyday lives. Setting a positive example, working constructively with others, treating others with dignity and respect and taking responsibility for our actions are examples of principles which define our faith.
On a day-to-day basis, these principles may be demonstrated by the small business owner who must make decisions on how to motivate and compensate employees, the parents who must decide where the family will live, the investor who must make investment decisions with fellow business partners and the community volunteer who must decide to which need he or she will dedicate time. Each of these decisions involves a form of risk taking based on principle.
Although the topic of risk culture will permeate the economic climate and banking industry for years to come, it has roots in the faith which defines us as Christians and which can be exemplified in our everyday living.
Questions for reflection:
- What role did constituencies such as Wall Street, consumers, financial institutions, regulators, Congress and the Administration play in the economic crisis? Have they taken accountability for their actions that led to the crisis?
- What core values are most critical for these constituencies going forward to prevent another economic crisis, and how do they align with everyday Christian principles?
- What changes can I make in my everyday life to ensure that I, as a consumer, take accountability for our collective economic well being?
—Mary E. Tuuk, Class of 1986, Executive Vice President and Chief Risk Officer, Fifth Third Bancorp