Canadian Underwriter
News

Financial services organizations should include board members who have non-financial services expertise: OSFI


May 19, 2009   by Canadian Underwriter


Print this page Share

Insurance companies and other financial institutions should think carefully about adding directors with insurance, banking and/or risk management expertise as a way to deepen board discussions during times of financial risk, Canada’s solvency supervisor says.
Julie Dickson, superintendent of the Office of the Superintendent of Financial Institutions (OSFI), made her remarks in a speech to the 2009 Financial Services Invitational Forum in Cambridge in May 2009.
In her prepared text, Dickson said OSFI “needs to do more to assess boards’ effectiveness especially in the areas of compensation and risk management, and has begun this effort.”
She observed that financial institutions have discussed with the regulator the virtues of adding board members with particular experience in insurance, banking and/or risk management as a means to deal with issues related to the current global recession.  
On the one hand, she acknowledged the reasoning behind this approach in her speech.
“I have been told that boards that have added people who understand the [banking or insurance industries], and risk management in particular, have deepened board discussions,” she said. “This is a good thing and should be encouraged, as long as other directors that do not have a financial services background do not suddenly feel they have no more need to probe.”
On the other hand, risk management may be too important to leave in the hands of the experts.
“The world has become acutely aware that many people who managed risk, and should have identified risks early, did not do a good job of it,” Dickson said. “So adding more financial services expertise to the board is not the solution to the global financial turmoil, but it is something that all boards should consider, because continuing the status quo may not be wise.”
Dickson added experience in financial services should not be a mandatory requirement to sit on the board of a financial institution.
“Directors do not need to be experts in banking or insurance to ask basic, intelligent questions and probe,” she said. “You do not need to be an expert in risk management to detect when answers seem muddled or are incomprehensible. You do not need to be an expert in risk management to get concerned when certain personality traits on the part of management become evident.”