RISK MANAGEMENT PROGRAM
IDENTIFY, MEASURE, MONITOR, CONTROL
Risk Management (and Enterprise Risk Management "ERM") is the process of Identifying, Measuring, Monitoring and Controlling all risks in a given entity. Many banks have some form of risk assessment, but the various risks are often modeled and analyzed in silos. A proper risk management program brings all of the risk assessments under one common umbrella, with one process and one model. The process:
- Identifies risk through a CAMELS +++ self-assessment which includes detailed ratio analytics, regulatory targets, peer benchmarking, and future projections.
- Measures risk by identifying each risk component, delineating the data and analytics required to measure the risk, prioritizing and rating the risk and finally identifying key measurement metrics for each risk component.
- Monitors risk by modeling projections using a single comprehensive model. When done this way, banks can stress test risks on a single variable or multiple variable approach and instantaneously see the results on the entire organization, eliminating the “silo” effect.
- Controls risk by re-evaluating policies and procedures, ensuring that the bank has the appropriate infrastructure (people, systems, process, etc.) and by forecasting the risk position of the bank at any point in the future.
INTERACTIVE & STRAIGHT FOWARD PROCESS
- Banks must understand that a risk management process is not a “one size fits all” activity and that each institution has a unique prioritization of risks.
- The program allows the bank to analyze the way in which risk affects the overall institution so that no one risk is looked at in a vacuum.
- By identifying and proactively addressing risks, institutions can protect and create value.
- FinPro’s Risk mManagement Program provides quarterly updates of the analysis which is needed as the institution’s risk profile changes over time.
- FinPro’s staff of former senior regulators with over 200 years of combined regulatory experience provide extensive expertise and are uniquely positioned to assist financial institutions in assessing the overall risk profile.
EIGHT PHASES OF THE FINPRO ENTERPRISE RISK MANAGEMENT PROCESS
- Phase One: Make planning, budgeting, stress testing, asset/liability management and compliance modeling ONE process.
- Phase Two: Conduct an Enterprise Risk Assessment for your organization utilizing the CAMELS+++ approach. Identify the risks by area.
- Phase Three: Prioritize the risks based on quantified and qualified results.
- Phase Four: Ensure the data integrity and define the data sources.
- Phase Five: For all high priority risks, define and conduct stress tests.
- Phase Six: Prepare alternative plan scenarios for high risk assessments and model at an incremental balance sheet and income statement basis.
- Phase Seven: Ensure people, policies and procedures are established to properly manage risks.
- Phase Eight: Review performance in context of overall enterprise risk management.