Jul 20, 2014
The recent financial crisis is slowly fading from our memories, yet its lasting effects continue on. Among all the new guidance, regulations and mortgage rules, another area is garnering increasing attention from regulators and examiners: risk management. No longer, they advise, should financial institutions take a siloed approach to risk management, with each area operating separately from the others. Doing so could possibly foster the type of poor decision-making that led to the financial crisis in the first place.
Regulators are of the general opinion that if bankers aren't collectively considering all the risks they face, they are not really managing risk at all. Rather, a bank's risk areas should be viewed as interactive parts of a solid whole, each affecting the other. This approach, called Enterprise Risk Management (ERM), already is practiced in the country's largest banks, but community financial institutions must follow suit. This white paper will examine how ERM can help both bank management and the board of directors gain a complete picture of all risk areas and how they work together to ultimately affect a bank's overall performance.