Reputation risk for senior leaders in all walks of public life has become a major concern in recent years. Who wants to be a business leader these days? Why, indeed, would people want to expose themselves to constant criticism, close scrutiny, and the threat of career oblivion due to what was once deemed a minor slip?
Consider the fate of highly regarded bank CEO, Alison Rose. Here is a good example of how sudden media storms can blow up, leaving senior people and their teams exposed to opprobrium and ill-prepared for a fast-moving narrative.
Of course, writing as a banker, even dodging a tube fare could spell the end for one’s career at the hands of watchful regulators. But the case of the NatWest CEO’s fall from grace is evidence of the significant non-regulatory risk posed by a hyper-aggressive, headline-chasing media combined with tricky politics. The Coutts/NatWest crisis came seemingly from nowhere. It happened against a background of more conventional finance industry woes involving liquidity runs, credit losses, money laundering debacles, and crypto implosions. The Rose wrecking was a different kind of banking mess.
So what might we learn from what might be better termed the Farage farrago? Essentially, it is a salutary lesson on how not to manage reputation risk. It is the ultimate irony that, in trying to dump Mr Farage as a customer, seemingly to protect its reputation, Coutts watched the whole episode blow a large CEO-shaped hole in that reputation.
The bankers involved were clearly out of their depth when thinking they would take on a canny populist with phenomenal media skills in the form of Mr Farage. Whatever one might think of his political convictions, he is a slick media operator who understands communications and messaging. This he ruthlessly deploys to demolish his opponents. Indeed, mistakes by the bankers in their subsequent communications and reactions to the unfolding furore, made a bad situation worse, culminating in the very public defenestration of both the Coutts and NatWest CEOs.
This then is a story of how a reputation- and brand-building exercise can go horribly wrong. It serves as a reminder of some of the less-visible risks faced by banks in their daily operations and the importance of speedy and accurate communications, coupled with a robust crisis management plan. If banks have become a lot better in managing their credit and operational risks, more work needs to be done in the area of reputation risk and communications, not forgetting that when responding to this kind of crisis, it also helps to understand the political mood.
Perhaps Alison Rose fell as much on account of politics and the politicians (NatWest still being 40% government owned). This brings us to one final mystery — the extraordinary Teflon coating that envelops the senior political class. The expanding inquiry into the handling of the Covid-19 pandemic lays bare dreadful decision-making and poor analytical skills at the highest levels of government, something no board or banking regulator would accept.
And yet, the fallout, so far, seems muted. After-dinner speech invitations, radio/TV slot hosting, fees to appear in gruelling reality TV shows, all seem to gravitate to some of the poorest decision-makers of our time.
One final contextual element in this debacle is the current tendency for politicians, regulators and a variety of pressure groups to judge banks not by what they do, but who they bank. Consequently, there are mounting calls from some sections of the community to de-bank customers for a range of ESG-related reasons (think oil and gas companies) or individual customers where whiffs of scandal, corruption or other supposed bad activity hangs in the air. Know your customer and due diligence rules do not always make choices clear. However, trying to de-bank Mr Farage was where the bank went too far and got it wrong.
There is, of course, a certain irony in the fact that a generally well-regarded banker, one who scored well in terms of walking the ESG and diversity talk, should fall so fast to the guns of a man who seeks to repudiate much of what ESG is supposed to stand for. This amply illustrates the complexity of dealing with such matters.
The Coutts-Farage bust-up does, therefore, emphasise the need for banks to proceed with extreme caution and tighten their internal and external communications, mindful that 15 years after the financial crisis, banks and bankers continue to suffer from very poor reputations. No one gives them the benefit of the doubt or shows them much sympathy.
Leaders — bankers, in particular — are therefore exposed to unprecedented levels of critical examination. They are expected to deal with situations for which they may well be unprepared, and generally ill-equipped. Gone are the days when managing a bank was simply to worry about the balance sheet and turn up for a long lunch.
Tim Skeet has spent much of his 40-year career specialising in bank funding in the capital markets, but also dealing with media and communications issues. The views expressed here are his own.
