10 Aspects of a Good Risk Appetite Implementation Process

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

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10 ASPECTS OF A GOODRISK APPETITE IMPLEMENTATION PROCESSAn Excerpt from the Credit Risk Management Audio Conference SeriesSpeaker: Lynn Koncz, SVP/Enterprise Risk Management, PNC Bank


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BENEFITS OF A ROBUST AND EVOLVING RISK APPETITE FRAMEWORK

A robust and evolving risk

appetite framework:

• Leverages existing practices.

• Represents the aggregate view of risk across all lines of business and risk categories.

• Creates a dynamic structure that allows for internal and external changes in risk.


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You should incorporate the following 10 factors into your

risk appetite implementation/reassessment

process.

K

I

S

R


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BALANCE RISK AND REWARD

Reward

1Risk


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Make sure all employees understand:

The bank’s overall risk philosophy.

The bank’s risk appetite.

And how it applies to their

respective roles.

ENSURE UNDERSTANDING2


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3 ESTABLISH RISK PROCESSES

Identify risk.Assess risk.

Categorize risk.


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Collaborate with key teams to identify and

mitigate risks.

4 COLLABORATE


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5Each team should:

Be tasked with risk management activities.

Have clear and well-understood roles and

responsibilities.


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COMMUNICATE

Across the enterprise

Up to the board of directors

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STRIVE FOR CONTINUOUS IMPROVEMENT

Create a mindset of continuous improveme

nt by:

• Setting goals.• Managing to key risk

management objectives.

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Select highly experienced

individuals with specialty risk

expertise for core risk areas.

8 SELECT EXPERIENCED INDIVIDUALS


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Identification process

Escalation process

Review process

9 CREATE PROCESSES FOR EMERGING RISK ISSUES


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Ensure that the riskmanagement team is directly

involved in strategic planning and new business initiatives.

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ABOUT RMA’S CREDIT RISK MANAGEMENT AUDIO CONFERENCE SERIES

This popular series of ten audio conferences highlights the current issues and trends in the credit risk management arena.

Participants have the opportunity to hear from seasoned industry experts and engage in lively discussions on the topics that matter most today.

Learn more.

https://www.rmahq.org/meetingdetail.aspx?productid=270083209&gmssopc=1


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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.

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Managing Portfolio Limits BLOG POST Posted on November 19, 2015 by rmablog

A bank’s risk tolerance and risk diversification policies should drive portfolio limits. Well established policies and procedures can help maintain controls over concentrations and help produce the desired mix of the loan portfolio.

In the most recent installment of the Credit Risk Management Audio Conference Series, Lynn Koncz, SVP/Enterprise Risk Management at PNC Bank, discussed how her bank manages its portfolio limits through its risk appetite framework.

PNC has recently reassessed their existing risk appetite to address the changes—new regulations, multiple bank acquisitions, an economic downturn, stress testing requirements, Basel, and heightened standards—that have taken place in the economic environment over the past several years. The more robust and evolving risk appetite framework leverages existing practices, represents the aggregate view of risk across all lines of business and risk categories, and creates a dynamic structure that allows for internal and external changes in risk.

Koncz shared lessons learned during the bank’s risk appetite implementation process:

• Balance both risk and reward.

• Ensure all employees understand PNC’s overall risk philosophy and appetite and how it applies to their respective roles.

• Establish processes to identify, assess, and categorize risks.

• Collaborate with key teams to identify and mitigate risks.

• Task each team with risk management activities and ensure that the team has clear and well-understood roles and responsibilities.

• Communicate across the enterprise and up to the board of directors.

• Create a mindset of continuous improvement by setting goals and managing against key risk management objectives.

• Select highly experienced individuals with specialty risk expertise for core risk areas.

• Create an identification, review, and escalation process for emerging risk issues.

• Ensure that the risk management organization is directly involved in strategic planning and new business initiatives.

http://rmablog.rmahq.org/2015/11/19/managing-portfolio-limits/




http://rmablog.rmahq.org/author/rmassociationblog/

Economy & Finance

10 Aspects of a Good Risk Appetite Implementation Process