Risk Management: Building an Integrated Program to Drive Business Value

Transcription

1 Risk Management: Building an Integrated Program to Drive Business Value Presenter s Name Saturday, September 24, 2011 Agenda Identify key forces impacting risk management Evaluate the maturity of your current risk management program Describe how to integrate your risk management approach with business operations to increase effectiveness and deliver business value Apply key principles in a community bank case study Experis Saturday, September 24,

2 Forces Impacting Risk Managment Strategic Imperatives Experis Saturday, September 24,

3 My company has kept up with regulatory changes and compliance testing: True for both 44% 68% We have only implemented required changes 33% No Response 7% 14% We are behind on both We have only completed our testing program 0% 0% 3% 13% 18% 0% 10% 20% 30% 40% 50% 60% 70% Source Experis Finance Webinar Series - Achieving Cost-Effective Bank Compliance 3/15/2011 Poll Participants: 102 Community Bank/CU, 28 Large Bank Large Bank Community Bank/CU Experis Saturday, September 24, Are you? Experis Saturday, September 24,

4 Dodd-Frank will most impact: Business Processes 26% 38% Interaction with our customers CFPB 7% 25% No Response 9% 20% Other Capital Management Employee Compensation 6% 5% 15% 14% 13% 12% 0% 10% 20% 30% 40% Source: Experis Finance Webinar Series - FI Regulatory Update 6/8/11 Poll Participants: 123 Community Bank/CU and 67 Large Bank Large Bank Community Bank/CU Experis Saturday, September 24, Key Operational Risks for 2011 Key Risks Enterprise New Regulations Risk Governance & Framework Operational Risk Processes Management Reporting Post M&A Integrations and Reorganizations Line of Business New Products Mortgage / Foreclosure Processes Outsourcing / Shared Services Data Management Spreadsheets Business Continuity Experis Saturday, September 24,

5 Evaluating Your Current Program Risk and Compliance Maturity Continuum Experis Saturday, September 24,

6 Top objective for our compliance program is to: Integrate regulatory changes with business processes 31% 58% Form an action plan to implement regulatory changes No Response 11% 13% 16% 23% Communicate regulatory changes to our business units Evaluate process changes for compliance updates 4% 7% 8% 15% 1% Other 3% 0% 10% 20% 30% 40% 50% 60% Source: Experis Finance Webinar Series - FI Regulatory Update 6/8/11 Poll Participants: 123 Community Bank/CU and 67 Large Bank Large Bank Community Bank/CU Experis Saturday, September 24, Activity Write down the top 3 risk areas affecting your organization Rate the maturity of your risk and compliance structure for each area Foundational Fundamental Sustainable Integrated Optimal Write down the most significant barrier to moving each risk area up one level Experis Saturday, September 24,

7 Integration to Drive Value On a Journey to Drive Value... Experis Saturday, September 24,

8 From Surviving to Thriving What if your risk management environment... Aligned with the business strategy Aligned with the organization and organization structure Quickly incorporated changes in business models and products Integrated with operations and enabled regulatory changes to seamlessly flow into policies and front line activities Experis Saturday, September 24, Is Your Strategy on Point? Innovation Client-Centric Low Cost Experis Saturday, September 24,

9 Aligning Risk and Strategy Board of Directors Policy Oversee Respond Evaluate Identify Analyze Business Units Review Advise Risk Management (Compliance) Remediate Operate Cooperate Test Audit Experis Saturday, September 24, Embedding risk as new business models and products are developed Common base products - conforming Variations to base products for specific channels or markets Common underwriting guidelines Variations of fees and rates by channel and market Increased product bundling at point of sale checking or savings accounts Increased regulations Product Mix Product Ownership New products identified by sales and customers and the products team Proposed new products are analyzed with the participation of all stakeholders prior to approval Bundled products are co-owned with other internal and external business partners Measure product profitability by channel Improved hedging and pooling efficiencies Tighter link between servicing costs and losses and origination prices and fees Profitability Management Release Capability New product releases coordinated by the products team Dramatically reduced release time for new products or changes to existing products across all channels. Ability to change prices and fees in near real time Ability of the product owners to modify business rules and underwriting guidelines without requiring programming changes Experis Saturday, September 24,

10 Fully Integrated Risk and Compliance Architecture Monitor Environment Maintain Policies Execute Policies Monitor and Confirm Compliance Manage Compliance Taxonomy/Data Management Regulatory & Subscription Content Policy Library Business Systems KRIs, Dashboards and Audit Files Tagged Sources (Structured Content) Transaction Files (e.g. Loan Files) Experis Saturday, September 24, Manage the Flow of Vital Information... Operational/Risk/Financial Applications Core Information Flow Experis Saturday, September 24,

11 In Two Directions Collaboration Tools Performance Management/Analytics Systems/KRIs Enterprise/Master Data Management Operational/Risk/Financial Applications Knowledge Flow Core Information Flow Experis Saturday, September 24, Enterprise-Wide Data Management Define Data required Frequency of data collection Scheduling Data Type Structured (databases, vendor applications, etc.) Semi Structured (service data suppliers, documents, ) Unstructured (multi -media) Enterprise Wide View Across functional groups, products and business lines Experis Saturday, September 24,

12 Enterprise-Wide Data Management Lifecycle Origin/capture through output/reporting Challenges Data identification and level of detail Collection Aggregation/consolidation Integrity Availability Benefits Better management and decision making Transparency Alignment of strategy and risk management Experis Saturday, September 24, Key Risk Indicators Selection process (top-down, bottom-up or hybrid) Relevance Measurable Predictive - leading, lagging or current perspective of an organization s risk exposures Easy to monitor Auditable Comparability Thresholds and limits Experis Saturday, September 24,

13 Maximize Value Confirm your risk universe Validate your risk assessment Re-analyze your controls (detective/preventative, effectiveness, frequency) Assess product and vendor risks Leverage compliance reviews to improve processes and update risk and control efforts Manage information Identify key indicators and provide a holistic view for management Evaluate your data inputs to ensure accuracy and integrity Identify effective data correlations to help management identify trends, risks and make informed decisions Ensure issues management databases are current, accurate and are tracked for progress and escalation Experis Saturday, September 24, Activity Review the most significant barrier to moving each risk area up one level from the previous activity For each area, identify one action step to move your organization towards greater risk, strategy and business alignment Experis Saturday, September 24,

14 Case Study Community Bank Example - Background Community Bank with $450 million in Assets Ownership: Non-stock (privately held) Regulators: OCC (primary), FDIC, Federal Reserve, SEC and FINRA Core Businesses: Personal Banking Business Banking Wealth Management Experis Saturday, September 24,

15 Community Bank Example - Strategy Grow client base Expand product offerings (brokerage) Open new branch(s) Increase assets Potential acquisition Potential public offering (private to public) Experis Saturday, September 24, Community Bank Example Business Issue Senior management was: Unsure of the organization s true risk vulnerabilities and coverage of risk exposure Concerned about the impact of unknown risks on strategic plans and public image (reputational) Due to: Product and asset growth Lack of collaboration between product teams Manual and time consuming data collection for reporting Poor analytics and reporting Inefficient issues identification and follow through Experis Saturday, September 24,

16 Activity You will only share the information you choose to reveal Form small groups of 3-5 individuals Discuss what specific actions you d prioritize, for example: Provide risk awareness training to employees Evaluate third party risk and data tools Analyze risk assessment versus historical loss data Implement a new product risk assessment procedure and template Identify complete risk universe Implement management reporting Locate passport and purchase plane ticket to Mexico Move to Vegas and become a professional gambler Other? Experis Saturday, September 24, Community Bank Example - Solution (in order of execution) 1. Mapped all processes, activities and controls (complete universe) 2. Identified complete risk universe 3. Developed and executed an enterprise risk assessment 4. Analyzed risk assessment versus historical loss data 5. Identified current high risk exposures, operational risk profile and action plans 6. Developed a strong centralized risk framework and governance 7. Defined clear risk policies, procedures and appetites 8. Identified key indicators for lines of business, products and enterprise 9. Implemented management reporting incorporating key indicators, issues and current operational risk profile (including data correlations such as loss versus risk scoring, FTE versus transaction volume, etc.) Experis Saturday, September 24,

17 Community Bank Example - Solution (in order of execution) 10.Developed an internal solution to collect and aggregate data for management reporting including issues, losses, risk assessments and key indicators 11.Agreed to a risk communication plan 12.Implemented a new product, third party and process change risk assessment procedure and templates 13.Identified process improvement opportunities 14.Provided risk awareness training to employees 15.Evaluate third party risk and data tools Experis Saturday, September 24, Community Bank Example - Results Improved processes (efficiencies, costs, etc..) Stronger vendor selection and management (better performance and reduced costs) Stronger control environment Reduced losses Enhanced accuracy of capital Mitigated risks of regulatory actions and fines Aligned strategy and risk management (upcoming FDICIA, SARBOX, etc.) Enhanced decision-making Improved audit function with lower internal audit costs Enabled a risk aware culture Moved from reactive towards more proactive risk management Experis Saturday, September 24,

18 Questions and Answers To Register for Experis s Bi-Weekly Regulatory Update Please call or Missy Helgerson melissa.helgerson@experis.com Experis Saturday, September 24,

19 Presenters: Bill Gienke Director, Financial Services Industry Jim Valentino Director, Financial Services Industry For more information, please visit Experis Saturday, September 24,