Risky business

Cute animals and brave tots are always going to win out when it comes to visuals, but Michael Davern knew his subject was an extra-hard sell.

“I have to confess I don’t have any nice pretty pictures of frogs or anything like that because if I had pictures it would include a bunch of guys in suits who are bankers and that’s probably not going to get the sort of reception one would like in this sort of event,” Associate Professor Michael Davern from the Faculty of Business and Economics said when accepting a 2009 Knowledge Transfer Excellence Award for the project “Developing the Risk Professional: A Collaboration with NAB.”

But wait a minute – the project was conceived prior to the global financial crisis.

“Interestingly risk management has become much more topical since we started the project,” Associate Professor Davern says.

“A lot of people would look at this and say ‘Well you’re being timely responding to the global financial crisis.’ We actually started work on this project before the global financial crisis hit so I think it’s a good indication of the potential benefits when you engage with industry well, you can hit the leading edge of what’s going on.”

Crisis or no crisis, Associate Professor Davern identified a specific challenge to the faculty to which the project responds.

“We were looking at the challenge of how do we deliver a professional education that is both relevant, given the vocational interests of our students, but also academically rigorous and really is an education as opposed to training,” he says.

“From a broader perspective we are interested in developing closer ties with organisations like the National Australia Bank to provide context for the research projects in which we engage.” Indeed, subsequent to the awards, Associate Professor Davern has successfully collaborated with NAB to win an ARC Linkage Grant.

For the NAB, risk management is obviously a growing area of importance.

“They wanted to promote the risk management skill set and attract students to the area because of its growing strategic and economic importance.

“For their staff, NAB wanted to provide a training opportunity to inculcate their staff with a risk-aware culture, as risk management issues are permeating every aspect of their day to day business, it’s so important to them.”

So what goes on in this hands-on course that brings Parkville and Collins Street together to manage risk appetite without succumbing to either market threatening starvation or gluttony?

 “We’ve had access to thought leaders within NAB, from Executive General Managers to PR people responsible for keeping the CEO on message. These are key decision-makers driving insight, policy and at a more operational level loan approval authority in the hundreds of millions of dollars. So it’s a pretty heady group our students get to interact with,” Associate Professor Davern says.

“It’s about having students connect concepts and tools to significant business issues. For example, the major group project is a scenario planning exercise which brings the entire risk management skill set to bear, as students must examine plausible but uncertain future scenarios of significance to the business. Scenarios analysed included: What happens if unemployment hits 15 per cent; what happens if a carbon trading scheme comes in and doubles the price of all non-renewable energy sources; what happens if a computer virus takes out your ATM network?

“Pandemics are another good example scenario we discussed. Students work through their scenario planning exercises during the semester and then submit a report and give a presentation in the final class. NAB provides an expert panel of the executives who would normally sit and evaluate these scenarios in NAB’s own internal scenario planning. The panel questions the students and provides critique and feedback to give a real application perspective. The presentations provide a great forum for that two-way learning experience that is the holy grail of knowledge transfer.”

The program began with about 30 to 35 students in each semester in 2009. Associate Professor Davern says students came from multiple programs, including master of accounting, master of financial management, master of business and information technology, international business across faculties including some students from the Agriculture Business Masters program as well.

“NAB’s involvement in this has been extensive. They have acted as a true collaborator in the endeavour and I think this has been a critical success element here.

“In addition to financial support we’ve had around 20 senior NAB executives as expert guest speakers in the class. Sometimes we have two or three NAB people in one night, sharing their experiences and skills, and providing perspective on issues like the global financial crisis, credit risk, technology risk, scenario planning and analysis. It’s a great exposure to rich application contexts, from senior executives flying off to the US to visit with regulators to manage potential issues to the more routine assessment of credit risk and the holistic judgment required for managing a loan portfolio.

The successful pilot has led to a formal three-year agreement with NAB confirming financial support and provision of expertise.

Already 11 NAB staff are to be enrolled in the subject for professional development purposes and the team of NAB senior executives returns to share their expertise. Past NAB participants have remarked how much they enjoy the weekly sessions as a refreshing change from the industry norm of intensive block training. Indeed, they saw the depth and complexity of the area as requiring the more traditional university-based approach.

And they found the course engaging and challenging.

Even the NAB student participants who were working directly in the risk management area saw the benefits of the collaboration with the University, and the rigour and challenges it brings to study, notes Associate Professor Davern. “I had participants from the risk management area come out of the class and the exam remarking: ‘Wow, this is really testing my knowledge and my thinking skills in this developing area.’ And I think that’s really a testament to what we’re able to do in that mutual learning context,” says Associate Professor Davern.