8 Risk Management Tips You Need to Know Now

Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending

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8 RISK MANAGEMENT TIPS YOU

NEED TO KNOW NOW

An Excerpt from “2017 Industry Insights:

Perspectives from the Front Line”

by RMA’s Credit Risk Council


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The Challenges Ahead


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MAINTAINING PERSPECTIVE

AND HOLDING THE LINE

As this credit cycle

continues, maintaining

perspective and holding the

line have become

increasingly difficult for risk

managers.

Remaining vigilant while

dealing with increasing

benevolence is one of the

toughest, yet most important,

aspects of the job.


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Agreeing to

small or

subtle policy

changes

today may

cause

remorse

tomorrow.

Unfortunately,

there is no

crystal ball and

though

discipline and

consistency

are the goals,

risk managers

may fall victim

in some form

or another.

POLICIES

Policies


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GROWING THE BUSINESS

Banks need to

have the discipline

and foresight to

temper that growth

and take a longer-

term view.

But how can

banks strike

the right

balance?

There is pressure

to grow the

business even

though it may

seem prudent to

pull back and sit

on the sidelines.


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How can risk managers

navigate this

challenging period?


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8 TIPS TO NAVIGATE TODAY’S ENVIRONMENT

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7

Steps

to take

Encourage

cross

communication.

Put talent in the

right roles.

Stay measured; hold

to group limits.

Reaffirm business

strategies and risk

appetites.Examine your

exception

reporting.

Review your

underwriting

standards.

Encourage

more

socialization. 8

Work together

early.


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ENCOURAGE MORE SOCIALIZATION

Encourage more

socialization of tough or

on-the-edge requests even

if the request is within your

discretionary authority; if in

doubt, elevate.

This takes the pressure off

the individual adjudicator.

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REVIEW YOUR

UNDERWRITING STANDARDS

Tighten your underwriting

standards even if the result is

simply to send a message or,

better yet, identify cracks

before it's too late.

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EXAMINE YOUR EXCEPTION REPORTING

Examine your

exception

reporting and

ensure it's

providing the

right type of

information with

sufficient

granularity and

accuracy.

• Doing so allows for effective

monitoring for pockets of risk or

troublesome trends such as risk

layering; i.e., multiple exceptions

in one credit.

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REAFFIRM BUSINESS STRATEGIES

AND RISK APPETITES

Reaffirm business strategies and risk appetites with the heads of businesses to ensure the organization looks at its business objectives and goals in a consistent way.

Moving off strategy or strategy-drift to achieve growth goals is a sure sign of trouble that will introduce new risks.

Not staying within the bank's strategy can be as fatal as not staying within the bank's risk appetite.

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STAY MEASURED; HOLD TO GROUP

EXPOSURE LIMITS

• This places the discipline back on the business to

manage and ensures overall hold levels are

maintained.

Besides staying measured on individual hold levels

and granting exceptions where warranted, hold the

business to aggregate group exposure limits; i.e.,

aggregate all hold level excesses that exceed single

name policy limits and have them managed to an

overall cap.

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PUT TALENT IN THE RIGHT ROLES

Ensure that

the right talent

is in key roles.

Empower those

who have the

fortitude and

experience to

hold the line and

can be relied on

when the

pressure to do

business

becomes difficult.

Then ensure they

are provided strong

support.

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ENCOURAGE CROSS COMMUNICATION

Encourage greater

communication between risk,

the underwriters, and the

front line to work through the

issues before they become

real problems or, worse, are

irreversible.

Open and transparent

communication solves

problems and creates

stronger partnerships.

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WORK TOGETHER EARLY

• Get workout teams working sooner and more closely

with the line at the earliest sign of deterioration to identify

emerging problems and take a preventive approach.

• This visibility

can be one of the

best early warning

indicators.

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The Credit Risk Council supports

professionals who are responsible for

establishing, maintaining, or carrying

out credit risk management policies.

The council focuses on funded and

off-balance-sheet risk management,

including capital markets activity, and

other forms of credit intermediation

and risk mitigation.

About RMA’s Credit Risk Council


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For additional information about

credit risk management,

visit

www.rmahq.org/credit-risk/

LEARN MORE

http://www.rmahq.org/credit-risk/


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SHARE THIS PRESENTATION

Visit http://www.rmahq.org for information on risk management.

RMA is a member-driven professional association whose sole

purpose is to advance sound risk principles in the financial services

industry.

RMA helps its members use sound risk principles to improve

institutional performance and financial stability, and enhance the risk

competency of individuals through information, education, peer

sharing, and networking.

Become a member today.

http://www.rmahq.org/

http://landing.rmahq.org/membership

8 Risk Management Tips You Need to Know Now

Economy & Finance