Implementing an Enterprise-wide Risk Management Framework in a Financial Institution
Fred Vacelet, MBA, FRM/PRM, CTM, IFQ, is an international Financial Risk Management Consultant with expertise in Risk Management methodological frameworks. His experience spans some 25 years, advising international banks and software houses on risk management. Fred holds various degrees, including from London Business School, England, with post-graduate studies at the Technische (then West)-Berlin, Germany, and Keio, Japan, universities. His client list includes ABN Amro, Barclays, Credit Suisse, National Bank of Egypt. He is a published author on risk management and Basel Accords and a regular speaker at international conferences. Fred writes and presents training courses and workshops on risk management and Basel Accords.
Financial institutions most often inherit some implicit view on their risks and then add elements as time goes by, as mishaps occur and as regulators demand. The result is all too often the spectacle of a claim at consistency, whilst risk priorities are more the result of interdepartmental relationships, and some risks can be misunderstood. However, when setting up a complete framework, pitfalls are legion.
The top-down approach, starting with a strategic view of risk appetite, is unlikely to work, as shows the common prose found in annual reports about ‘our risk appetite’. The bottom-up approach, going via the reporting and management information system, shows more about the divide between the floors of the hierarchy.
When vertical approaches no longer work, if they ever did, a risk-culture-based approach is needed. It includes the traditional tools such as terms of reference, setting up risk committees, procedures books, risks and controls self-assessments, loss databases and others, up to Key Risk Indicators if these can bring some light.
For tail risks, however, traditional approaches bring about costly exercises aimed at reassuring stakeholders to come what may and make stress-testing scenarios a misguided regulatory duty rather than a managerial tool. In this webinar, we go through the traditional tools, highlighting the most common pitfalls, and then suggest an approach driven by independent departments within the financial institution.
- Prerequisite: governance and management
- The steps towards risk management optimization
- The traditional reactive approach to risks
- Regulatory requirements as a starting point
- The common tools
- Setting up a risk culture
Course Level - Intermediate
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