Bank risk management of the year: RHB Banking Group

Asia Risk Awards 2024

Most bank risk managers today have an array of data analytics at their fingertips to help them monitor, assess and report financial risks. In the past year, RHB Banking Group took the next step with its application of data analytics tools to a project aimed at driving better awareness, attitudes and behaviours towards risk throughout the wholesale banking group (GWB).

At the end of last year, the bank piloted a new risk culture metrics and dashboard, utilising Power BI, Microsoft’s interactive data visualisation software. This provides the team with detailed insights into loss incidents, categorising them by period, causal factors such as people, processes, systems and external events, as well as geographic regions and business segments. The new tool was rolled out fully for the wholesale banking group in the second financial quarter.

The steps taken that resulted in the development of this dashboard began at the start of 2023.  Around this time RHB’s risk management team began testing ideas on how to strengthen risk culture for different business segments across the GWB through a series of experimentation sprints.

“We also took a differentiated approach in driving risk culture through innovative sprints to test ideas and solutions that would work best for the targeted business segments,” says Zernil Lurthanathan, senior vice-president, risk strategy and transformation and enterprise risk analytics at RHB. “As a result, we were able to define quantifiable metrics backed by analytics to measure the effectiveness of our risk culture efforts.”

Chong Han Hwee, group chief risk officer at RHB, adds that a central question at the start was “how to translate this initiative into tangible value” for the bank.

“We quickly identified that establishing a quantifiable baseline was essential for measuring uplift, and establishing a credible measure for risk culture became our foremost priority,” says Chong.

Chong Han Hwee, RHB

He adds that the team focused on what measurements represented their risk culture, the data needed, and how to effectively communicate these outcomes to stakeholders. This led to the creation of a new dashboard with “drill-down capabilities”, so as to enable the risk management team to draw insights into items such as detected and reported loss events that can inform internal discussions. The dashboard has been embedded within GWB’s monthly business risk compliance officer’s report, which is presented at the group wholesale banking council.

Several other initiatives to improve risk culture spawned from the experimentation sprints. First, the bank rolled out a refreshed e-learning programme for staff to bolster risk awareness among staff. The revised course covered new and emerging risk scenarios such as phishing techniques that make use of generative artificial intelligence technologies. Secondly, the bank developed new early-warning models for fraud risk to better profile customers who are more likely to become a fraud victim and staff who are more likely to commit internal fraud.

Going forward, RHB plans to expand this data-driven approach to other business segments, including international operations, to further enhance its risk culture across the organisation.

ESG efforts

RHB has also made big strides in the implementation of its climate action programme over the past 12 months. The bank has been working to integrate climate risk into the risk-management framework – including stress testing, credit underwriting and risk-reporting processes – since the programme was launched approximately 18 months ago. The project, the bank says, has been a big success.

“We also rolled out the programme with 32 initiatives as the foundation that integrates both financed emission targets and risk management,” says Lurthanathan. “This includes establishing the climate risk framework and policies, embedding climate risk within credit decisioning, enhancing our scenario analysis and stress-testing models”.

Meanwhile, Chong notes that nurturing an environmental, social and governance (ESG) mindset is a “core component” of RHB’s corporate culture, and the bank plans to integrate ESG components, such as emission intensity by business division, into the overall risk culture dashboard in the future.

“This is aligned with our group climate action programme, which aims to not only meet regulatory expectations but, more importantly, to nurture our business units in growing their businesses responsibly,” he says.

As a Malaysia-headquartered bank, RHB’s ESG ambitions are in line with the country’s decarbonisation commitment. The Malaysian government aspires to achieve net-zero emissions by 2050. Working towards that target, RHB has cascaded these goals across sectors and business units and allocated substantial resources to prepare the business units to transition its clients toward a net-zero pathway.

“Through the implementation of 32 strategic initiatives under the group climate action programme, RHB is accelerating its commitment to a sustainable and climate resilient future,” Chong says.