This excerpt from RMA's Credit Risk Council's “2017 Industry Insights: Perspectives from the Front Line” talks about the challenges ahead and provides 8 tips on how risk managers can navigate today's banking environment.

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8 RISK MANAGEMENT TIPS YOU
NEED TO KNOW NOW
An Excerpt from “2017 Industry Insights:
Perspectives from the Front Line”
by RMA’s Credit Risk Council

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The Challenges Ahead

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MAINTAINING PERSPECTIVE
AND HOLDING THE LINE
As this credit cycle
continues, maintaining
perspective and holding the
line have become
increasingly difficult for risk
managers.
Remaining vigilant while
dealing with increasing
benevolence is one of the
toughest, yet most important,
aspects of the job.

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Agreeing to
small or
subtle policy
changes
today may
cause
remorse
tomorrow.
Unfortunately,
there is no
crystal ball and
though
discipline and
consistency
are the goals,
risk managers
may fall victim
in some form
or another.
POLICIES
Policies

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GROWING THE BUSINESS
Banks need to
have the discipline
and foresight to
temper that growth
and take a longer-
term view.
But how can
banks strike
the right
balance?
There is pressure
to grow the
business even
though it may
seem prudent to
pull back and sit
on the sidelines.

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How can risk managers
navigate this
challenging period?

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8 TIPS TO NAVIGATE TODAY’S ENVIRONMENT
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Steps
to take
Encourage
cross
communication.
Put talent in the
right roles.
Stay measured; hold
to group limits.
Reaffirm business
strategies and risk
appetites.
Examine your
exception
reporting.
Review your
underwriting
standards.
Encourage
more
socialization. 8
Work together
early.

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ENCOURAGE MORE SOCIALIZATION
Encourage more
socialization of tough or
on-the-edge requests even
if the request is within your
discretionary authority; if in
doubt, elevate.
This takes the pressure off
the individual adjudicator.
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REVIEW YOUR
UNDERWRITING STANDARDS
Tighten your underwriting
standards even if the result is
simply to send a message or,
better yet, identify cracks
before it's too late.
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EXAMINE YOUR EXCEPTION REPORTING
Examine your
exception
reporting and
ensure it's
providing the
right type of
information with
sufficient
granularity and
accuracy.
• Doing so allows for effective
monitoring for pockets of risk or
troublesome trends such as risk
layering; i.e., multiple exceptions
in one credit.
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REAFFIRM BUSINESS STRATEGIES
AND RISK APPETITES
Reaffirm business strategies and risk
appetites with the heads of businesses to
ensure the organization looks at its
business objectives and goals in a
consistent way.
Moving off strategy or strategy-drift to
achieve growth goals is a sure sign of
trouble that will introduce new risks.
Not staying within the bank's strategy can
be as fatal as not staying within the bank's
risk appetite.
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STAY MEASURED; HOLD TO GROUP
EXPOSURE LIMITS
• This places the discipline back on the business to
manage and ensures overall hold levels are
maintained.
Besides staying measured on individual hold levels
and granting exceptions where warranted, hold the
business to aggregate group exposure limits; i.e.,
aggregate all hold level excesses that exceed single
name policy limits and have them managed to an
overall cap.
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PUT TALENT IN THE RIGHT ROLES
Ensure that
the right talent
is in key roles.
Empower those
who have the
fortitude and
experience to
hold the line and
can be relied on
when the
pressure to do
business
becomes difficult.
Then ensure they
are provided strong
support.
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ENCOURAGE CROSS COMMUNICATION
Encourage greater
communication between risk,
the underwriters, and the
front line to work through the
issues before they become
real problems or, worse, are
irreversible.
Open and transparent
communication solves
problems and creates
stronger partnerships.
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WORK TOGETHER EARLY
• Get workout teams working sooner and more closely
with the line at the earliest sign of deterioration to identify
emerging problems and take a preventive approach.
• This visibility
can be one of the
best early warning
indicators.
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The Credit Risk Council supports
professionals who are responsible for
establishing, maintaining, or carrying
out credit risk management policies.
The council focuses on funded and
off-balance-sheet risk management,
including capital markets activity, and
other forms of credit intermediation
and risk mitigation.
About RMA’s Credit Risk Council

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For additional information about
credit risk management,
visit
www.rmahq.org/credit-risk/
LEARN MORE

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