Effective risk management is critical for any financial services organization. This is the same in so many industries, such as insurance. Newly-hired risk management executives need to start somewhere, but where?
For one, proper bank risk management software is a good starting place. If implemented and utilized properly, such a platform facilitates:
- The engagement of front-line supervisors and subject matter experts
Frontline supervisors and experts serve as the first lines of defense to risk. They are the most familiar with incidents and engaging them in regular incident reporting and risk assessments are crucial to the success of any risk management program.
- Connections across business silos.
Connecting the dots between risks occurring across silos enables risk managers to identify upstream and downstream dependencies. This brings common root causes to the surface, and ties together existing mitigation and monitoring activities from across the business. Risk teams can then understand the effectiveness of their existing controls, and prevent cascading collateral damage.
- The escalation of top risks to the right person.
When risks are tied to common root causes and existing controls, organizations can objectively prioritize the risks that would have the greatest impact on their operations, financial performance, and reputation.
An effective risk management program has workflows that enable risks to be assigned to individuals who can allocate the right resources to mitigate the risk. This would have allowed Wells Fargo risk managers to prevent one-hundred-percent of the scandals that occurred in the last two years and the financial consequences of these failures.
Video training programs for managers and executives are helpful for awareness in a good security culture but are proven to be lacking the mechanism to identify, assess, mitigate and monitor risks. Organizations with ERM programs that utilize ERM software have a 25% market value premium versus their peers without. With the right risk culture, software, infrastructure, and good governance, Wells Fargo could have identified the root causes of its problems and mitigated those risks before they inflicted significant damage.
While Wells Fargo can’t go back in time to fix its mistakes, it can take steps to make sure this never happens again. The first of these steps are outlined in a free on-demand video webinar, How to Operationalize Risk Management, which provides a step-by-step guide to setting up an effective ERM program.
The final topic in our series is presenting enterprise risk management to the board of directors. We cover everything you need to know in our free on-demand video webinar: “Present ERM to the Board.” This approach would make risk management activities relevant to all employees, ensuring the company’s risks are managed effectively.
Wells Fargo appears to be getting the message. Time will tell if the changes being made will allow the bank to successfully rebuild its reputation and regain the trust of its customers, investors, and regulators.