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David Law is the director of group risk at Lloyds TSB in London. He recently gave an interview at .

Lloyds TSB's EWRM programme began in earnest in December 2000, but most of
2001 was spent on external research, to decide upon the most appropriate
approach for the bank, and on inculcating a risk management culture within the
bank itself – part of Law's key challenge.

“When you introduce this kind of change,” he says, “you have to be careful that it's
not just seen as the latest management fad. You have to spell out the benefits and
win hearts and minds.”

To this end, the group risk (GR) function in Lloyds TSB has been running EWRM
workshops, using anonymous voting methodology to allow the staff within a
business unit to identify the risks they face to the achievement of their objectives
and classify them according to severity. “We then report that information back up
to the MD of that business line, and within the group risk function. We'll do that at
every one of the group's businesses over the next two years.”

Law's team puts great emphasis on the importance of this kind of internal
education exercise, and on the need for a common 'risk language' for staff to
communicate about risk management. “You need to communicate to people so
that they can see why you're changing traditional processes,” he says. “We work
with business areas to identify specific action which they will take within their own
business unit, to inculcate EWRM as a culture.” Key to this attempt to instil a risk
management culture are the 12 “visions of EWRM” set out by group risk (see box
2, below).

The other analogy Law uses is that of the “washing line”. He likens the bank's
approach to risk before the introduction of enterprise-wide risk management to a
set of towels on a washing line. Credit risk, market risk, operational risk and other
categories hang side by side but separately on the line. They only become tangled
when an occasional breeze – in other words, a problem – blows them together,
then disentangle again to hang separately. “The group risk structure, and the
implementation of EWRM, brings together the different towels, or strands of risk,
leading to more effective risk management,” Law says.

Underpinning the group's approach to EWRM are the 11 'generic risk drivers' that
the GR team has identified, which are:

Customer treatment;
Products and services;
Governance, people and organisation;
Financial control;
Legal and regulatory; and
Change management.

The aim is to analyse the risk in each business area against these categories,
then present the level or 'temperature' of risks in a format that can be easily

While there is far greater sophistication in measuring and understanding market
and credit risk, there is arguably a greater potential threat to a business from operating
risk than from market or credit risk. “Most major bank losses are driven by
operational risk in some way,” he notes.

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