From India to banking crises, Pam Kaur, HSBC global head of internal audit and group managing director, speaks openly to Chris Evans about her life and career challenges
“Trust in the progress we make in financial services to improve transparency, accountability and confidence in our actions gets undermined when anyone falls short of expectations.”
These reflections from Pam Kaur, a long-term professional in financial services, certainly ring true, and no doubt would receive a sombre nod of acknowledgement from her contemporaries. But they would be unlikely to elicit much sympathy from the public and only further the argument: does the industry really get it?
Kaur is convinced the groundwork for change is being laid, albeit slowly, for the next generation, and that to survive, financial institutions must continue improving and regulate their own practices while adapting their business models to the ‘new world’.“
There’s a much greater focus on IT initiatives, digital delivery models and platforms, as well as a new generation of professionals coming through with new ideas and inspirations,” explains Kaur, who is also on the board of the Financial Services Faculty and a member of the ICAEW council where she “contributes to the evolving regulatory, business, risk and people agenda of the industry”.
She adds:“Short-term changes are not the answer, we need sustainable measures that last.”This particularly applies to internal audit controls as the spotlight has very much been turned in the direction of internal auditors post-crisis.
Indeed Kaur is currently assisting with a refresh of the Financial Services Code, introduced by the Chartered Institute of Internal Auditors back in 2013 to address in most part the role of internal auditors, their accountability and why they matter.
“With increased relevance, comes greater accountability,” admits Kaur. “That is a massive shift, in terms of how the audit function is positioned, its stature, requirements, the people’s skillsets investment in the function and resources, and the outcomes it needs to achieve.”
For her part, since joining HSBC as its Global Head of Internal Audit in April 2013, Kaur has already made important changes. Chief among these is transforming her team from a federated model to a centralised global audit function. She’s also improved the subject matter expertise of her staff and changed their reporting line and seniority.
Dialogue with regulators has also evolved. “We’re doing things not just from a reactive, but proactive mode. We do continuous monitoring, focusing on emerging risks, and look at how the three lines of defence model works on an aggregate basis.”
This diligent and thorough approach has been the hallmark of Kaur’s lengthy and impressive career, which spans three decades, working for a variety of major organisations, from IBM to HSBC. But the road hasn’t always been smooth.
“I first moved from India to the UK in the early 1980s and found it hard to adjust,” concedes Kaur. “That was a time from a diversity and race perspective that was very challenging. I didn’t feel welcomed. Plus there was a little bit of hostility because of the economic environment. This was the year after the winter of discontent.”
Kaur decided to move back to India to do a Bachelors degree in Commerce and an MBA in finance, but her summer training during the MBA at IBM brought her back to the UK. It proved to be a turning point, changing her mind about living here.
“Working for a company like IBM in the 1980s was exciting. It was on the rise and the culture was very entrepreneurial. I was allowed to work directly with clients in the services sector and government, literally on the credit relationships to see if it was better for them to buy these new computers or have them on operating leases. It was a thrilling time.”
Her work with one of the clients, Price Waterhouse (pre-merger), inspired her to do an accountancy exam. So having completed her MBA, she applied for apprenticeships at the Big 8 and joined Ernst & Whinney (soon to be Ernst & Young) in 1986.
“This was my first adventure on the Number 11 bus to work, which has continued throughout my career, even to this day at HSBC,” laughs Kaur. Her time at the accounting firm brought her into
contact with quite a few banking clients, but also a broader range of organisations and their activities, including the privatisation of British Airways and RTZ’s acquisition of BP’s minerals unit.
These were real eye-opening experiences. But Kaur was determined to work for a large global organisation. Her reputation had already grown to the extent that she was offered jobs at Citigroup, JP Morgan and Credit Suisse Financial Products. She decided to go for Citi, working as an auditor in the specialised investment and banking audit team. Within a few years she was promoted to head of the audit team covering investment banking, corporate finance and audits for the EMEA region.
“From a career trajectory perspective it was my first senior role. I was 30 years old and a lot of my team were older and more experienced than me, so it was a good management challenge.”
Then in 1996, Kaur moved into the business side of Citi as head of business risk and control, global derivatives. This was a hot topic at the time as new exotic financial innovations hit the headlines after causing huge losses. Among the most spectacular misadventures were those of Gibson Greetings, the Cincinnati card and wrapping company, and the Bankers Trust “smoking gun” transactions.
“These are case studies we still talk about. The market wasn’t fully understanding of the products. Even large corporates were losing money and there were customer suitability issues,” says Kaur. “It was an interesting time because it meant that people in control roles were recognised. I was at the forefront in a first line business and risk control role.”
Kaur moved from an office in the third line of audit to one on the trading floor. She soon realised the timeframes for decision-making were quicker.
“I was developing and approving new products on a constant basis, everything from commodity to credit derivatives,” Kaur enthuses. “It was highly entrepreneurial. It had its fraught moments because the currency markets were volatile and interest rates went into double digits.”
During this time, Kaur managed to introduce an innovative Management Self-Assessment approach to the bank’s first and second line. In other words, staff taking ownership of their actions, rather than waiting for others to detect any problems. “I’m pleased to say nearly all major audit functions over time have now adopted the same approach.”
Then Citicorp merged with Travelers and Kaur’s role changed. After helping see through the transition, she moved into financial crime compliance and regulatory compliance work in the emerging markets. Again she was promoted within two years to be Chief Compliance Officer Citi International and subsequently Group Director of Compliance, Global Consumer Group, which meant moving to New York.
“I lived in Manhattan and loved life there. If I was single and younger, wild horses couldn’t have dragged me away. But I was turning 40 and it was proving difficult having a long-distance relationship with myhusband after a few years,” she explains.
A brief stint at Lloyds TSB as group head of compliance and anti money laundering followed, before RBS came calling. She returned to her roots in finance and became head of shared services for finance and risk. This was 2006. A year later everything changed for Kaur and everyone else.
“When the crisis hit, I was in a meeting with a colleague. We received a message about Lehman Brothers. Then the HBOS and Lloyds story unfolded,
and we knew we were going to be next,” Kaur recalls.
A lot of shock and stress followed. Kaur was given the task of identifying which businesses needed divestiture and then sold them. She was also made executive head of the asset protection scheme, sonegotiating with government on which assets needed to be insured to keep RBS alive.
“That was a tough, challenging, but rewarding experience, working through constructing a credit derivative of £250bn of underlying assets,” says Kaur. “Negotiations lasted from February to Christmas 2009. I was the executive to sign on behalf of RBS, so had to do all sorts of interesting risk weighted asset calculations. But we got there in the end.”
In 2010 she decided to move on to lead the audit function at Deutsche Bank where she was reporting directly to the CEO, so the pressure and responsibility were great. But she had to deal with legacy and management restructuring issues.
Joining HSBC felt like coming home for Kaur, years after leaving Citi. “I enjoy the multicultural set-up, range of priorities and regulatory requirements of a
global organisation,” insists Kaur.
“As long as you put in a framework, and are rigorous and disciplined in an evidential sense, it shouldn’t be a problem to meet the Basel requirements, IIA guidelines and Heightened Standards for US regulators.
“They are all driven by a fundamental factor – do you have the right skillset to do objective, quality work that can be relied upon by multiple stakeholders, which make our institutions safer today and stronger tomorrow? I’m confident I can answer yes.”