In a speech delivered late last month, Anneli Tuominen, a Member of the Supervisory Board at the European Central Bank (ECB), highlighted the rising complexity of the banking risk landscape and its implications for organizational governance.
She noted that banks now face both traditional risks (credit, market, and liquidity) and non-traditional risks (cyber threats, IT-related vulnerabilities, geopolitical tensions, hybrid threats, etc.). These risks are growing in magnitude and their interaction can amplify traditional exposures, increasing demands on bank boards.
Tuominen outlined three essential qualities for the “board of the future.” First, she argued, boards must possess a sound knowledge base and robust awareness to manage evolving risks, including IT and cyber risks, and to set appropriate risk tolerance levels. This requires diverse expertise, sufficient experience, and proactive engagement with strategic and operational risk issues.
Second, boards must demonstrate strong communication skills and actively invest in franchise value to mitigate reputational risks, as misinformation and cyber incidents can quickly affect liquidity and trust, Tuominen said. And third, boards need to balance adaptation and innovation, weighing short-term efficiency against long-term strategic investment, while managing associated risks.
“The altered risk landscape which has emerged in recent years is not only new to banks, but also to us supervisors,” Tuominen concluded. “There has therefore been a learning curve on both sides. We have tried to tailor our supervisory initiatives to help banks manage risks in these non-traditional areas, and in doing so, we have also had to reassess some of our own processes and practices to be able to deliver on our goals. This will continue to be our guiding approach, because as the popular proverb goes, ‘if you want to go fast, go alone, but if you want to go far, go together’.”
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