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The obsession with green: Subconsciously increasing risk in third-party governance
The purpose of this paper is to argue that senior management is increasing risk as a direct result of risk mitigation actions. This report looks at governance and risk in the context of third-party governance and argues that boards and senior managers need to reevaluate their own understanding of risk before applying their culture to third party oversight. The paper examines the obsession with the colour green, which we believe is leading to passive oversight and a lack of operational and risk awareness. At such a point, perception becomes irrational and good (performance indicators that tell a story) is seen as bad and bad (weak green indicators) as good. This paper puts forward the suggestion that through better reporting and discussion, organisations can spend less time, have more understanding, reduce risk and give a better service to their clients.
The full article is available to institutions that have subscribed to the journal.
Don Nguyen joined Barings (formerly Babson Capital) in 2007. He covers various asset classes including senior, unitranche and mezzanine debt, high yield bonds, and private equity. His responsibilities include the management of the portfolio services team and oversight over investor reporting and performance. Don also manages the relationship with third party vendors that provide the respective administration, accounting, FX hedging, legal, operations, tax and trustee roles to the funds. Prior to Barings, Don spent six years at Deloitte in the investment management department. He holds a degree from Imperial College, London and a fellowship with The Institute of Chartered Accountants in England and Wales (ICAEW).
William Gilson is a former global head of operations and Luxembourg country head at Aviva Investors with more than 30 years’ experience in financial services. Prior to becoming a Luxembourg-based certified independent director, he was responsible for European operations at Babson Capital. His operational, compliance and risk experience covers all asset classes.