Season 2 | Ep. 7: CRO Succession Planning: Best Practices for Banks

Succession planning stands as a cornerstone of organizational management, especially within the risk departments of financial institutions. In a recent episode of the Risk Intel Podcast, host Ed Vincent, CEO of SRA Watchtower and guest Michael Glotz, CEO of SRA Consulting delved into the intricacies of succession planning in risk management. Below are some of the key insights shared in this insightful discussion.

The Importance of Succession Planning in Risk Management

On the heals of recent headlines from Silicon Valley Bank and most recently the unexpected departure of New York Community Bancorp's chief risk officer, has sent shockwaves through the industry. Shortly after NYCB CRO's exit, the bank reported significant losses from real estate lending, triggering a nearly 40% plunge in its stock value. This unanticipated downturn underscores the vulnerability of financial institutions to the sudden departure of key risk management personnel and the profound impact it can have on the organization's financial health.

Glotz underscores the significance of succession planning in ensuring knowledge continuity within the risk department. He highlights the multifaceted nature of the banking industry, where comprehension of regulations and adaptation to technological advancements are pivotal for effective risk management. Glotz stresses that cultivating this continuity takes time and is indispensable for adeptly mitigating risks.

"...if you don't have that continuity of knowledge, there's a real risk that the risk staff is not properly covering all the needed areas and so there's additional exposure banks could have, that could impact the bank in the process" - Michael Glotz, CEO, SRA Consulting

Best Practices in Succession Planning

The conversation progresses to discuss best practices in succession planning, with Glotz sharing invaluable insights.

• ‍Start Early and Document A Plan: Initiate succession planning well in advance of any anticipated vacancies. This includes developing a comprehensive and documented plan outlining roles, success criteria, competencies, and timelines.

• Define Success Criteria and Competencies: Clearly define the success criteria for each leadership position, including necessary skills, experience, and key competencies required for successful performance in the role.

• Identify and Develop Internal Talent: Explore internal talent pools within the organization for potential successors and provide opportunities for cross-training, mentorship, and skill development to groom internal candidates for future leadership roles.

• Cross Training and Rotation: Continuously cross train and evaluate potential candidates for succession. Offer ongoing training, mentoring, and rotational job opportunities to prepare potential successors for leadership roles.

• ‍Have Contingency Plans and External Options: Develop contingency plans to address unexpected vacancies or delays in internal succession. Consider external candidates if internal talent is not readily available or suitable for the role.

Internal vs. External Candidates

Glotz weighs the merits and demerits of selecting internal versus external candidates for pivotal roles like a Chief Risk Officer (CRO). While larger institutions may possess the resources to cultivate internal candidates, smaller ones often need to seek external talent. He recommends having a contingency plan and leveraging external consultants if required, particularly during leadership transitions.

Conclusion

Succession planning emerges as a vital element of effective risk management, particularly in the dynamic realm of the banking industry. The insights shared in this SRA Risk Intel Podcast episode illuminate the significance of continuity, best practices, and the ongoing nature of succession planning. By embracing these strategies, organizations can ensure seamless transitions and mitigate risks associated with leadership changes in their risk departments.

The episode concludes with Vincent expressing appreciation to Glotz for his insights and spotlighting SRA Consulting's expertise in furnishing fractional CRO services and aid with succession planning. The discussion leaves listeners with valuable insights and pragmatic strategies for navigating succession planning in risk management. Stay tuned for a future episode on this topic where the team will dive deeper into topics around real life examples and lessons learned, to how regulators view succession planning for critical role's at the bank.