Enterprise risk management is the process of managing the gap between strategy and execution throughout the bank. In other words it is a management tool to help ensure more certain implementation of goals and objectives of the shareholders, Board of Directors, management and the customers. However, ERM is not for every bank. Your organization's structure and processes may already achieve the objectives of ERM. You may only need to define the process as such. Here are 3 of the 10 questions the CEO should ask to determine whether ERM is right for his or her community bank:
1. Are key initiatives driven clearly and directly by the company's vision, mission, values and its strategic plan?
If you answered no, you are not alone. Often we discover that community banks have a documented strategic plan because it is required. However, more often that not these organizations do not use the strategic plan and there is no defining vision for the bank. Management tends to spend more time firefighting and little to no time implementing changes necessary to ensure the business strategy becomes a reality. The ERM process utilizes existing resources to more effectively understand, communicate and implement business strategy and eliminate risks that could stop or slow strategy execution.
2. Do regulators have recurring findings that are similar in nature?
If your answer is "yes", it likely means there are parts of the organization not effectively guided by strategy, personnel or processes. In this case, ERM processes could materially reduce the headache and surprise caused by the regulatory examination process. ERM will help your organization identify and correct process gaps creating these reportable conditions.
3. You, as the bank's CEO, spend very little time managing issues that others in the organization should have identified before you got involved?
No is the common answer to this question. Most community bank CEO's have 8, 10 or 12 direct reports. He or she is the go to person for the BOD and the shareholders and is most usually the "chief relationship officer". With these issues in play there is little time to inspect the expected from the management team. Time for analytics and strategy development or deployment is just not there. ERM helps simply organize and streamline the flow of communication surrounding strategy, risk management and the information necessary to make good risk management decisions on a daily basis.
More of the Top 10 questions your financial institution CEO should ask before adopting enterprise risk management to come.
No comments:
Post a Comment