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Although Covid-19 posed an entirely new challenge to risk managers, strategic risks and trends that were present prior to March 2020 persist still. In this Q&A, Marcus Chromik, Chief Risk Officer & Board Member, Commerzbank, talks to us about the risks that, despite the pandemic, need careful thought.

How have risk managers perceived the past year?

Covid-19 was a new challenge for risk managers. Overall, it appears that risk managers did a pretty good job in managing the Covid crisis for individual banks and the financial system as a whole. The exchange within the teams and especially with risk colleagues was excellent. Through cooperation and collaboration, we found encouraging solutions. Despite the high level of uncertainty, financial institutions together with governmental and supervisory authorities have mastered this uncharted territory relatively well. Inspiring to see how much can be achieved in a very short amount of time. But the crisis is not over yet; we are still dealing with the economic fall-out of the pandemic.

So Covid-19 is still impacting risk managers every day. What about future risks?

Our collective experience of the past year should encourage us when it comes to tackling other pressing global risks like geopolitical risks, climate risks, and risks arising from the digital revolution. These global risks cannot be managed one by one, as they are all interconnected – partly in a competing and partly in an allied way. Therefore, I am convinced: the more we join forces, the more we can get done. And there are quite some efforts remaining.

Let’s take the example of geopolitical risks. Even before the outbreak of Covid-19, we had been observing an increase in global fragmentation. Without doubt, the pandemic has increased this trend. We are seeing diverging markets and as Europeans, we are sitting in between the powers of US and China. In the EU, we have spent a lot of time and energy focusing on Brexit. And this fact diverted much of our attention from the big risks that are still present. As a result, Europe has not yet found, nor established the robust leadership it needs to navigate its course through global geopolitical risks.

Second, the risks of climate change are by far the biggest risk of all we are facing. The increasing importance of sustainability is irreversible and has major implications. We see some great initiatives like the UN-convened Net Zero Banking Alliance, an initial cohort of 43 of the world’s leading banks – Commerzbank among them. This group commits to align operational and attributable emissions from their portfolios with pathways to net-zero by 2050 or sooner.

However, one should not forget, that climate change will also increase geopolitical tensions as there will be governments and countries which shall lose out because of the transition risks – e.g. countries relying on export of carbon fuels. In particular, the poorest countries have little or no chance to impact their own carbon reduction. They are also often hit hardest by the effects of climate change such as extreme weather events. Even worse, due to, for example, frequent flooding they might lose support for crucial infrastructure projects such as the construction of a new port or dams and bridges. The implications of an imbalance of climate change-related risks across the globe – be it direct or indirect – cannot be underestimated.

You’ve spoken about the urgency of addressing climate change risks before – are you concerned about the rate at which it is addressed?

Some people think that we still have time to deal with climate risks. That it still takes time for the physical and transitional risks to materialize. But is this really true? I believe that in any case, an increasing number of stakeholders will demand a sustainable transformation of the economic agents on short notice. And we know the power of the market and the accelerating effect it has on transitional changes! So we better act now and manage those risks.

And finally, what about the risks brought on by the digital revolution?

With regard to digital risks, the pandemic has without doubt accelerated the digital revolution. However, it has also revealed Europe’s enormous technology dependence on the USA and China. Their large tech-companies have been the crisis winners. The trend towards online shopping and online banking had begun prior to January 2020. But the universal health guidance to stay indoors implied that almost overnight, nearly all of us moved to digital; Amazon deliveries; mobile payment transactions and, of course, digital communications. Today, so many of us are dependent on Zoom or Microsoft Teams – both US giants in this field. The speed of this change is happening much faster than any of us could ever have anticipated. And we Europeans need to take care of our digital sovereignty, not only because of data protection but of data security.

All these global risks require, in my opinion, one key answer: Collaboration – across borders, across industries, across risks.

How do you envision the role of Europe and the role of European risk managers in the digital revolution?

First, how do we do the digital catch-up? We as a sector need to team-up, digitally upgrade, and equip ourselves against the growing high-tech dominance of China and the US, both of which seek leadership in the field of artificial intelligence (AI). In Germany, we might not be the masters of AI algorithms or picture recognition. But we are the masters of sensor techniques. That’s something our engineers can provide and that we need to combine with all the global advances in order to keep up with the digital revolution.

Again: we must manage the data security, cyber risks, protection of intellectual property rights and protection of all values and privacy. One excellent example of collaboration is that we as banks in Europe set up the European Cloud User Coalition. As a strong user group, we can make sure that we have clear-cut standards when entering into contracts with cloud providers. We can negotiate so that our needs are adhered to and we have joint audits. As a result, there is not a single bank in this coalition that is facing a US or Chinese cloud giant without protection. It's a group of already 19 members. With one voice, it has the power to form standards such as the ECUC Position Paper (available at

Overall, our goal in Europe should be to act in a sovereign and independent manner in the digital space and to use our values to shape the digital future. With the Digital Services Act, the EU Commission sets the regulatory framework for platform providers and thus ensures a balance of forces.

Coming back to climate change risks, what does the future hold?

In respect of climate change, we see the European Green Deal is on our agenda in Europe and with Biden's presidency, I would say the Green Deal is on the global world leaders’ agendas, too. We are in this together and can jointly tackle consequences of climate change. The task is manifold. We need to make sure that whatever we do with financial incentives, subsidies, and any other post-pandemic support – that we are all moving in the right direction.

Traditional financial risks have been brought back into the limelight. What are the recent developments around those risks?

A good example of effective collaboration in this pandemic was the joint action in the European banking sector to secure room for maneuver. The European supervisory authority has made clear concessions on capital requirements. Among other things, the use of capital cushions was allowed and the requirements for the credit business were temporarily facilitated in order to support the supply of credit to the real economy. By collaborating on this important and powerful call by the ECB, the European banks helped unite actions and trust in banks and created buffers which luckily, in the end, weren’t used.

Finally, what’s your vision for risk managers within the financial services sector?

We as risk managers have a pivotal role to play when it comes to collaboration. After all, we are used to collaborating far beyond our European borders. Even though we work in competing institutions, we don't really see ourselves as competitors. We know that if one of us makes a mistake in risk management, it can impact others. We aren’t really interested in one of us failing because we know that’s bad for the whole system. We get together regularly to discuss global risks, political trends, and regulation which has created a solid platform for us to reach out further. And we are viewed as prudent by our role, as the consciousness of our banks.

Imagine the strength of our voice – as risk managers of critical global businesses – if we could be heard on these global issues. I think, one of our priority should be to make sure that our voices are heard. I truly believe and hope that as a group of risk managers we can be a voice of reason and rationality in the global risk debate.

Covid-19 recovery, Brexit, and key policy developments across Europe

What’s driving the status quo? Can we collaborate better to create more synergy cross border?

Marcus Chromik, Chief Risk Officer & Board Member, Commerzbank, talks about the complex geopolitical and regulatory landscape in Europe.

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