Fiserv: 10 Steps to Enterprise Risk Management
Posted: 24 January 2017 | Source: Fiserv
Risk management is a hot topic in today’s banking industry with the OCC, FDIC and other regulators issuing specific guidance for bank directors on risk management. Enterprise risk management (ERM) is often touted as the most effective management approach. While most financial institutions have many of the essential elements of ERM in place, many with less than $1 billion in assets do not have a cohesive ERM program in place. A comprehensive approach can help achieve that objective.
How We Got Here
For most of the 20th century, risk management regulation focused heavily on credit risk, with little attention devoted to operational risk. The savings and loan crisis, the growing importance of the Bank Secrecy Act (BSA), 9/11, the advent of the USA PATRIOT Act and other historic developments changed the risk management picture. Asset-liability committees (ALCO), a refined CAMELS rating system and new consumer protection requirements also became part of the risk management mix.
This gradual recognition of the many factors that comprise a bank’s risk profile, and the piecemeal evolution of the examination procedures that resulted, virtually assured the creation of separate risk management silos, particularly within smaller financial institutions. These silos make it difficult for directors and senior management to see and understand the total risk picture.