TraceRiskChange Management

Change Management

Risk Inventory

Risk Inventory is a “fourth” dimension of risk that provides insight into embedded elements of risk that are not specifically covered by a Key Risk Indicator. Subtle risks are inventoried in this way so that they can be studied orthographically. What does that mean? Orthographic representations of risk are from made from the front view (Subjects), the top view (Silos), the end view (COSO), and, from the inside out ( which is ‘Risk Inventory’). Examples of risk inventory are Product Development Risk, Customer Relations Risk, Training & Backup Risk and Denial of Service Risk.


Deposit Accounts

Use Case for Assessing Risk on Deposit Accounts

Why assess the risk? Deposits are funds that customers place with the bank and that the bank is obligated to repay on demand or after a specific period of time or after the expiration of some required notice period (e.g. certificate of deposit). Deposits are the primary funding source for most banks and, as a result, have a significant effect on the bank’s liquidity. Errors and omissions and fraudulent alteration of the amount or account number to which funds are to be deposited could result in a loss to the bank. Additionally, uncollected overdrafts, returned items, kiting and other check schemes and frauds can result in losses on deposit accounts.

Who should assess the risks? Chief Operating Officer, Chief Financial Officer, BSA Officer, Compliance Officer

How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation. Use the “Focus Risk Assessment” tool for in-depth analysis of risks and mitigation techniques.

 

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Debit Cards

Use Case for Assessing Risk on Debit Cards

Why assess the risk?   Online debit cards use a PIN for customer authentication and online access to account balance information. At present, financial institutions authenticate customers by matching the PIN with the account number directly through a merchant’s terminal. Banks engaged in retail payment systems should establish an appropriate risk management process that identifies, measures, monitors, and limits risks. Management and the board should manage and mitigate the identified risks through effective internal and external audit, physical and logical information security, business continuity planning, vendor management, operational controls, and legal measures. Risk management strategies should reflect the nature and complexity of the institution’s participation in retail payment systems, including any support they offer to clearing and settlement systems. Management should develop risk management processes that capture not only operational risks, but also credit, liquidity, strategic, reputational, legal, and compliance risks, particularly as they engage in new retail payment products and systems.  Management should also develop an enterprise wide view of retail payment activities due to cross-channel risk. These risk management processes should consider the risks posed by third-party service providers.
Who should assess the risks? Electronic Banking Officer, Operations Administrator, Cash Management/ACH Officer, Chief Financial Officer, Information Technology Officer, Data Security Officer

How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation. Use the “Focus Risk Assessment” tool for in-depth analysis of risks and mitigation techniques.

 

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Credit Administration

Use Case for Assessing Risk on Loan Administration

Why assess the risk? Credit administration and the quality of the loan portfolio is among the most important aspects of the bank’s business strategy. To a great extent, it is the quality of a bank’s loan portfolio that determines the profitability of the bank and the ultimate return on investment to the shareholders. Conclusions regarding the bank’s condition and the quality of its management are weighted heavily by the degree of risk in lending practices. The loan portfolio and its administration recognizes that loans comprise a major portion of the bank’s assets and that it is this asset category which ordinarily presents the greatest credit risk and potential loss exposure to the bank. Moreover, pressure for increased profitability, liquidity considerations, and a vastly more complex marketplace have produced an ever-changing risk profile to the bank.

Who should assess the risks? Credit Administrator, Chief Credit Officer, Chief Lending Officer, Directors’ Loan Committee

How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation. Use the “Focus Risk Assessment” tool for in-depth analysis of risks and mitigation techniques.

 

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Corporate Governance & Ethics

Use Case for Assessing Corporate Governance & Ethics Risk
Why assess the risk? Given the important financial intermediation role of banks in the economy, the public and the market have a high degree of sensitivity to any difficulties potentially arising from any corporate governance shortcomings in banks. Poor corporate governance can contribute to a bank’s failure and can lead to markets losing confidence in the ability of the bank to properly manage its assets and liabilities, including deposits, which could in turn trigger a bank run or a liquidity crisis. In addition to its responsibilities to shareholders, the bank also has a responsibility to its depositors and to other recognized stakeholders. The presence of an effective corporate governance system helps to provide a degree of confidence that is necessary for the proper functioning of a community bank.

Who should assess the risks? Board Chairperson, Board Members, Chief Executive Officer / President, Legal Counsel
How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation.
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