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To risk or not to risk that is the question. Risk Management perspective


Published on LinkedIn December 9th, 2016

Pierre Jean Gallant MBA, FICB, SME, CSC, IFC

CEO at Complete CU Services


What is the definition of risk?


I remember hearing this story from a friend that knew someone that had a friend that was writing an entrance exam for a private college in Montreal. For the sake of this article let’s call the individual “Erika”. The only question on the entrance exam was “What is risk?” Urban legend has it that Erika wrote these two words on the test paper: “This is.” She submitted her response and left the examination room. She was accepted into the College. Whether this was an urban legend or not, for years I thought Erika was brilliant until I started specializing in Risk Management. I then quickly realized that Erika was not necessarily brilliant, but maybe she didn’t want to go to that College at all for personal reasons, in which case her plan completely backfired.  Either way, it is safe to say that she had a very high-risk tolerance and risk appetite as this was a total crapshoot. So would we prefer Erika to be the Chief Risk Officer (CRO) responsible for the actuaries of a large multinational insurance company or, a CRO of a recreational beach sand castle architectural firm? I couldn’t make an informed decision based solely knowing one of her experiences however, sometimes businesses take strategic decisions based on one individual’s or a consultant’s risk perspective.    


Daily decisions measure risk based on temperament, values...


Without realizing it, we make multiple decisions each day that involves risk, some have controls and some are based on a quick intuition. Most of us set our alarm clocks at a specific time to control when we should wake up so we won’t be late for an appointment or work. So, is it risky to be late for work? It could have serious consequences depending on the context. You could be late for the most important meeting of the year or, maybe your employer has warned you on your tardiness many times and today, it tips the balance past your supervisor’s tolerance level. We automatically measure risks internally by the consequences that we imagine and the probability that we estimate it could actually occur. Because it’s not a science, we don’t always accurately measure the consequences and final impacts because we are skewing them with our temperament and past experiences. Essentially, we are creating limits on our personal tolerance and believe that everyone’s limits are the same as ours. Without getting too philosophical, tolerance can be on opposite sides of the spectrum depending on an almost infinite multitude of factors. So in our alarm clock example, if Erika’s nature is being laid back and is easygoing, she may never be stressed out for being late or ever consider losing her job. While Charlie suffers from anxiety if he is one second late for work because, on the 8th of December 1978, when he was 15-year old, he went to his first teenage high school dance. Saturday, he woke up late to deliver his morning paper route. He was fired because 25 clients complained that they didn’t get the Saturday comic strips on time for breakfast and some had missed important TV shows because they didn’t have the TV Guide. Additionally, he had friction with his high school sweetheart because he couldn’t buy her the CHIC’s - Le Freak 8 track tape for Christmas as he’d promised. Lastly, Charlie’s dad was furious because he worked as a printing machinist at the Newspaper and all his workmates razzed him about his son for years.




It’s almost impossible to accurately define and measure business risk, however, being proactive and providing a proper assessment tailored for the business will help mitigate risk. So whether you are a CRO of a large corporation designing an Enterprise Risk Management model, or Small Business Owner deciding if you will design or launch a new product, Management and the Board Members should not only consider Erika’s and Charlie’s perspectives, but also the views of different line levels of the organization and most importantly specific to its external environment and challenges (your clients; their perception and feedback). Those elements become the foundation to draft projections, balancing risks, opportunities and measuring the probable consequences and impacts. As my Business partner Ray always says; if you can’t see the forest through the trees, make sure your team can help you get a new prescription for your eyeglasses.


Pierre Jean Gallant MBA, FICB, SME, CSC, IFC

CEO at Complete CU Services

Did I mention that my Internal Auditor saves our Credit Union money $$? What? Are you serious??


Published on Linkedin September 19, 2016

Pierre Jean Gallant MBA, FICB, SME, CSC, IFC

CEO at Complete Ontario Credit Union Services

I know there are many misconceptions about Internal Auditors (IAs) and yes, it’s true, traditionally there was a lot of IAs that were professional tick and bobbers, wore grey suits, didn’t smile, and appeared to get a kick out of intimidating folks.... Okay, perhaps there are still a few around.

Today I’m writing about the IAs of a different mindset that Ray Di Lullo and I evolved with during our careers which I‘ll refer to it like the post “Lotus 1-2-3 & WordPerfect 5.1” generation. For those of you who aren’t familiar with Lotus 1-2-3 or WordPerfect 5.1, they were the prehistoric versions that evolved into Microsoft Excel and Word. Like the DOS to Windows evolution, the IA profession evolved as well. Ray and I were quite fortunate to work in a cutting edge IA environment. An environment where we were to throw out our paradigms and encouraged to brainstorm be creative and think outside of the box. 

Now let’s get to the money and the savings here goes...During the course of an audit, your IA will usually look at various processes to see how it flows from point A to point B. I like using the day to day examples. If you’re like me, when you fill your car’s tank with expensive gas you want to make sure it goes to the right place, right? Well, car manufacturers have process engineers to design the most effective and efficient way to make your car run otherwise car companies could lose their competitive edge and eventually miss out on needed profits. So think of your IA as one of those process engineers that can help your Credit Union in optimizing your internal processes. Okay, more specifically, as part of the Audit Plan the IA will review say.... retail or commercial lending. Generally, the IA would review a sample of files in order to determine any material systemic issues and at the same time verify the lending process from application, due diligence, adjudication to disbursement. Through my experience, more often than not, there is some confusion regarding responsibilities in the due diligence process between the Lender and the Adjudicator. The Adjudicator will sometimes waste time doing more due diligence than the Lender when it should be the other way around, not only for the efficiency but the potential conflict of interest and independence. A clear definition of who does what at the due diligence stage can definitely save time and money. This is only a tiny sub-portion of the lending process so imagine all the other possibilities just as your IA. 

Pierre Jean Gallant MBA, FICB, SME, CSC, IFC

Chief Executive Officer

Complete CU Services