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5 Factors That Improve Risk Management Culture

Sep 28, 2018 by Brian Arnesen

One of the best ways to mitigate risk is to foster a proactive risk management culture. As we have seen with institutions in the past, culture is the driving force behind employee behavior, decision making, growth, and regulatory scrutiny. Risk management culture should be the responsibility of all employees with upper management setting the example. 

Here are 5 factors that contribute to a robust risk management culture:Risk Identification

Identification

Potential risks must be proactively identified and managed. Your risk management team should have extensive experience within your organization in order to give a 360 degree perspective of risks facing your institution. Risk management oversight should include individuals from legal, compliance, operations, and the frontline.

Assessment

When a risk is identified, its level of severity must be measured using both quantitative and qualitative methods. Probability and scope of impact are the primary factors that affect whether a risk is high, moderate, or low risk and how risks should be prioritized. Risk management initiatives may include policy and procedure modifications, changes to operational functions, and/or enhancements to internal controls in order to reduce the probability of the risk occurring.

Response

When a risk is identified, its level of severity must be measured using both quantitative and qualitative methods. Probability and scope of impact are the primary factors that affect whether a risk is high, moderate, or low risk and how risks should be prioritized. Risk management initiatives may include policy and procedure modifications, changes to operational functions, and/or enhancements to internal controls in order to reduce the probability of the risk occurring.

Control & Monitoring

Two key elements to any risk management program are controlling and monitoring internal and external activities. Controls need to be implemented to mitigate risk and require ongoing monitoring to ensure accountability.

Communication

From the top of the organization down, risk management should be the responsibility of everyone. When decisions about risks are made, processes need to be communicated across the organization to ensure consistency.

While there are many different ways to analyze and monitor each type of risk within an organization, Compliance EAGLE is the only compliance solution that allows you to run automated compliance reviews in real-time while loans are in process. So, if you are interested in reducing your compliance risk, give us a call today.

 

 
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