management to emphasize that each of these disci-plines serves a critical role in an institution. Sustainability management should not be perceived as replacing or competing with something that is currently done in the institution. It represents an incremental value-added
managerial process that is a distinct and important part of risk governance at a financial institution.
18.2.2. Evolutionary Implementation, not Revolutionary Imposition
The key steps outlined previously require a significant amount of financial analysis to arrive at important decisions. Therefore, sustainability manage¬ment can and should begin as an initiative under the auspices of the chief financial officer rather than first establishing a new organization structure, which should evolve as the implementation progresses. On the one hand, its implementation needs to be sensitive to minimize disruption and confu¬sion. On the other hand, its integration into the overall management pro¬cess of the firm is needed for the institution to view tail risk distinctly and manage it effectively.
18.2.3. Three Effectiveness Drivers
18.2.3.1. Captain and Quarterback
Most organizations know that if it is important, it needs to have an owner, a “captain” or a “quarterback” to provide the organizational leadership. For example, for effective financial management there is a chief financial offi¬cer, for effective risk management there is a chief risk officer, and for effec¬tive information management there is a chief information officer. Similarly, if there is something that—if not managed effectively—has the potential to adversely impact a going concern, then the institution needs to view it as not only important but also critical. Therefore, a chief sustainability offi-cer is the obvious role, not as a bureaucratic position, but to provide lead¬ership with a critical focus. This does not mean that hiring a chief sustainability officer is the first step at an institution. As mentioned previ-ously, the first step is defining and establishing the need, which should drive the adoption of sustainability management as a critical priority, and the steps outlined earlier should dictate when a quarterback should be designated.
18.2.3.2. Culture
While experts have studied the importance of culture extensively, it is still hard to define it in plain language and in tangible terms. Culture relates to expectations that drive individual behavior, and collective individual behav¬ior impacts the culture. That’s why values and expectations must be first defined so that the expected behavior is clear.
Objectives, goals, and policies can be developed relatively quickly, but building and establishing a new culture takes time. Effective sustainability management does not get established by simply writing objectives, goals, and policies or by issuing an edict.
In order for something as critical as sustainability management to become a part of an organization’s culture, it needs to be adopted into the managerial process. This requires, among other things, training and educat¬ing managers to think differently and use the 3-D view of the risk–return equation. They must understand that sustainability-management and risk-management policies need to work in partnership; there is no conflict between them.
Actually, in this area, financial institutions have very significant experi¬ence. About 25 years ago, risk management was only a concept. Today it is an integral component of what financial institutions do. The evolution of risk management into its current role can be an excellent model for adapt¬ing organizations to sustainability management.
Organizational culture will impact how sustainability-management readiness is developed and implemented, and—as stated in Chapter 17— readiness has a direct impact on competitive advantage. Therefore, organiza¬tional cultural issues play an important role in capturing this competitive advantage.
18.2.3.3. Flexibility
While clearly defined policies are necessary to provide direction to large organizations, flexibility to adapt them to fit how the business is run is the key to effective implementation. Objectives, goals, policies, and limits
management to emphasize that each of these disci-plines serves a critical role in an institution. Sustainability management should not be perceived as replacing or competing with something that is currently done in the institution. It represents an incremental value-added
managerial process that is a distinct and important part of risk governance at a financial institution.
18.2.2. Evolutionary Implementation, not Revolutionary Imposition
The key steps outlined previously require a significant amount of financial analysis to arrive at important decisions. Therefore, sustainability manage¬ment can and should begin as an initiative under the auspices of the chief financial officer rather than first establishing a new organization structure, which should evolve as the implementation progresses. On the one hand, its implementation needs to be sensitive to minimize disruption and confu¬sion. On the other hand, its integration into the overall management pro¬cess of the firm is needed for the institution to view tail risk distinctly and manage it effectively.
18.2.3. Three Effectiveness Drivers
18.2.3.1. Captain and Quarterback
Most organizations know that if it is important, it needs to have an owner, a “captain” or a “quarterback” to provide the organizational leadership. For example, for effective financial management there is a chief financial offi¬cer, for effective risk management there is a chief risk officer, and for effec¬tive information management there is a chief information officer. Similarly, if there is something that—if not managed effectively—has the potential to adversely impact a going concern, then the institution needs to view it as not only important but also critical. Therefore, a chief sustainability offi-cer is the obvious role, not as a bureaucratic position, but to provide lead¬ership with a critical focus. This does not mean that hiring a chief sustainability officer is the first step at an institution. As mentioned previ-ously, the first step is defining and establishing the need, which should drive the adoption of sustainability management as a critical priority, and the steps outlined earlier should dictate when a quarterback should be designated.
18.2.3.2. Culture
While experts have studied the importance of culture extensively, it is still hard to define it in plain language and in tangible terms. Culture relates to expectations that drive individual behavior, and collective individual behav¬ior impacts the culture. That’s why values and expectations must be first defined so that the expected behavior is clear.
Objectives, goals, and policies can be developed relatively quickly, but building and establishing a new culture takes time. Effective sustainability management does not get established by simply writing objectives, goals, and policies or by issuing an edict.
In order for something as critical as sustainability management to become a part of an organization’s culture, it needs to be adopted into the managerial process. This requires, among other things, training and educat¬ing managers to think differently and use the 3-D view of the risk–return equation. They must understand that sustainability-management and risk-management policies need to work in partnership; there is no conflict between them.
Actually, in this area, financial institutions have very significant experi¬ence. About 25 years ago, risk management was only a concept. Today it is an integral component of what financial institutions do. The evolution of risk management into its current role can be an excellent model for adapt¬ing organizations to sustainability management.
Organizational culture will impact how sustainability-management readiness is developed and implemented, and—as stated in Chapter 17— readiness has a direct impact on competitive advantage. Therefore, organiza¬tional cultural issues play an important role in capturing this competitive advantage.
18.2.3.3. Flexibility
While clearly defined policies are necessary to provide direction to large organizations, flexibility to adapt them to fit how the business is run is the key to effective implementation. Objectives, goals, policies, and limits
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