“Embracing a grizzly bear” – How can risk leaders steer the business under uncertainty?

How can risk leaders navigate the next unexpected risk event? Nikolai Kukharkin, Managing Director, Global Head of Model Risk Management at MUFG, shares what he learnt about leadership and decision-making in volatile times.

Being comfortable with being uncomfortable is one of the greatest challenges leaders have in the face of volatility, and yet, it’s a crucial skill to enable calm responses under pressure. Drawing on an analytical background in physics and model risk management, Nikolai describes a structured, first-principles approach to problem solving and decision-making. He shares a lesson from a CEO during a period of banking stress: risk is inherent to business, but leaders must understand what they are taking on – “embracing a grizzly bear.”

As analytics evolve, quantitative models should support decisions rather than replace human judgment, especially in volatile conditions. Although risk management practices are often limited by historical data, AI-based techniques for more flexible scenario analysis are emerging. Risk managers, however, should be cautious of overreliance on AI outputs.

What skills and resources do CROs and risk leaders need during uncertain times?

• Adopt a structured problem-solving approach: Use first-principles thinking to analyse problems systematically, breaking them down into fundamental components for clearer decision-making.
• Understand and embrace risk: Recognise that risk is inherent to business and focus on understanding the nature and scope of the risks being taken, rather than avoiding them entirely – like "embracing the grizzly bear."
• Balance quantitative models with human judgment: Leverage quantitative models to inform decisions but avoid relying solely on them. Human judgment remains critical, especially in volatile and unpredictable conditions.
• Challenge traditional risk management practices: Be aware of the limitations of extrapolating past data and explore emerging AI-based techniques for flexible scenario analysis to better anticipate future uncertainties.
• Avoid overreliance on frameworks: While process and control frameworks are important, leaders should not depend on them excessively. Flexibility and adaptability are key in navigating uncertainty effectively.

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