Tomorrow's retail risk manager.(Retail Risk Management)

As banks become larger, the focus and training for retail risk managers become more specialized around specific products and services like indirect auto lending, credit cards, etc. Yet the future senior-level risk executive needs to be more of a generalist to successfully oversee several areas of risk. Bank executives, risk managers, and trainers discussed how they see the risk environment and the necessary training for the risk manager of the future.

Discount brokerage, insurance, and pension plans are but a few of the specialized areas developing in retail risk over the past few years. So it's no surprise that risk and training experts urge employees to develop a broader range of knowledge through various courses and on-the-job experience. This is the only path to becoming the true retail risk manager of the future.

Both formal and informal sources are needed to augment specialized skills. At many banks, risk professionals will begin to specialize in a particular area as they move up the corporate ladder. However, after a certain level, those same risk managers will need to know the nuances of other areas of risk. For example, a banker may rise to the level of indirect auto lending, then to manager of indirect lending, and then to manager of lending. While there are many similarities for risk management in those positions, there are differences as well. The manager of indirect lending might need to know very little about local housing trends, while that would be important information for the senior manager of lending. Failure to understand those differences also means more potential risk for the bank as the retail risk manager takes responsibility for larger portfolios as he or she advances in the organization.

Contributing to the training challenge is the growing burden of compliance as the government passes laws seeking to protect current and prospective bank customers (e.g., HMDA, CRA), to ensure proper governance (e.g., FDICIA, Sarbanes-Oxley), and to enlist financial institutions' assistance in the war on terror (e.g., the Patriot Act).

Needed: Breadth of Experience and Knowledge

While many banks espouse the benefits of an expanded knowledge base, several are only paying lip service to the concept, according to John Nuzum, former senior credit executive for JP Morgan Chase. "The banking business has evolved into something that is very compartmentalized," he says.

According to Nuzum, too many banks concern themselves with short-term training needs other than using a long-term focus, so training is similarly narrow in focus. But …