Thu 12 Jan 2012 - Andrew Cave, RBS
Demonstrating financial health and sustainability
A few years back the RBS Sustainability team commissioned a detailed piece of research - aimed at finding out what our stakeholders thought our sustainability priorities should be. Included in the top 10 were things like responsible lending and complaints handling….But right at the top of the list was the safety and security of the bank.
When you consider recent economic history – that’s perhaps not too surprising. The public want banks, and other socially significant businesses, to be solid and secure. To know their money is safe. In the past, that security was implicit or presumed. Following the financial crisis, banks are having to go much further to demonstrate their financial health.
The sustainability of our financial model is now being publicly discussed in terms of our capital ratio. RBS, like a number of other banks, has had to establish a ‘non-core’ division to off-load underperforming or higher risk assets. Through processes like Basel III, banks are having to meet standards that aim to ensure they can survive even the toughest economic headwinds.
These imperatives have placed finance and risk departments at the heart of companies’ efforts to be sustainable. Within this year’s awards, there are categories not just for big business, but for public sector and not-for-profit organisations too. While the responsibility on banks to be financially sustainable is clear – other sectors are also having to tackle this agenda.
As the state pulls back from a number of areas of social services, and funding is reduced, not-for-profits will be asked to fill some of the gaps. Sustainable financial models will be vital if they want to survive and attract new investment.
In the public sector the demand for greater efficiencies will also put pressure on finance teams to develop models and structures that can be sustained over the long term and at lower cost.
When I began working in this field eight years ago – the focus was very much on community engagement, environmental footprint and social impacts. Finance, and financial sustainability, have now joined them as recognised cornerstones of the sustainability agenda.