For risk managers, looking at individual exposures will not be redundant in the future, but it will not be sufficient either, according to Tamara Weiss, Chief Risk Officer at Landesbank Hessen-Thüringen (Helaba). She spoke at the „Credit Business of the Future“ symposium in Frankfurt, organised by Börsen-Zeitung and PwC. A paradigm shift has taken place in risk management in the years since the financial crisis, which have been particularly characterised by geopolitical crises and global problems.

Weiss referred to constant upheavals and critical situations – from rapidly rising refugee numbers in the middle of the last decade, to the UK's exit from the European Union, and the coronavirus pandemic. A „simple buy-and-hold strategy“ is neither an answer to these disruptive moments, nor to continuous developments such as digitalisation or climate change, which require a constant review of one's own portfolio.

According to Weiss, a risk manager must also take into account the fact that regulations are changing much more rapidly today than in the past. „Requirements used to apply for many years, but that is no longer the case today,“ she noted. And following the reform of capital requirements including the introduction of the output floor, risk managers also have to pay more attention to deciding which assets need to be backed with how much equity.

Last but not least, the financial risk associated with an investment is just one of many that require full attention. In addition – especially in a digital media landscape – there is reputational risk, compliance risk, the risk of cyber attacks, the risk of information technology that is not robust in the event of a stress event, and now even the dangers associated with the use of artificial intelligence. These are all compelling reasons to rethink and adapt the traditional risk management approach.

In the corporate customer business, for example, lenders need to take into account that the transformation paths of borrowers can be very capital intensive. It is crucial to consistently anchor transformation paths in portfolio management – and at the same time to involve employees in the credit departments in the reorganisation of risk management. In order to keep an eye on the much broader range of risks, risk managers need to develop into comprehensively trained strategists, for whom portfolio management takes centre stage instead of individual loans.

According to Weiss, artificial intelligence could help to make processes more efficient. But even in loan processing, she is convinced that AI has its limits. „The human factor remains important,“ emphasised the Landesbank executive, who worked at LBBW for more than 20 years before moving to Helaba. This is why she remains critical of the idea of using artificial intelligence across the board.