The document provides insights for risk managers on maintaining balance during challenging credit cycles, emphasizing the need for discipline and long-term perspectives. It suggests tightening underwriting standards, improving communication between teams, and managing aggregate exposure limits to mitigate risks. Additionally, it highlights the importance of having strong talent in key roles and encourages proactive engagement with emerging issues.

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JOIN. ENGAGE. LEAD.
HOW TO KEEP YOUR BALANCE AS
A RISK MANAGER
An Excerpt from “2017 Industry Insights:
Perspectives from the Front Line”
by RMA’s Credit Risk Council

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JOIN. ENGAGE. LEAD.
C
B
A
As this credit
cycle continues,
maintaining
perspective and
holding the line
have become
increasingly
difficult for risk
managers like
you.
Agreeing to
small or subtle
policy changes
today may
cause remorse
tomorrow.
Remaining vigilant
while dealing with
increasing
benevolence is one
of the toughest, yet
most important,
aspects of the job.

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JOIN. ENGAGE. LEAD.
F
E
D
Unfortunately,
your have no
crystal ball and,
though
discipline and
consistency are
the goals, you
may fall victim
in some form or
another.
Your bank
needs to have
the discipline
and foresight to
temper that
growth and
take a longer-
term view.
You’ll also feel
pressure to grow
the business
even though it
may seem
prudent to pull
back and sit on
the sidelines.

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JOIN. ENGAGE. LEAD.
How can you strike the right
balance?

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JOIN. ENGAGE. LEAD.
ENCOURAGE MORE SOCIALIZATION OF
TOUGH OR ON-THE-EDGE REQUESTS
• 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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JOIN. ENGAGE. LEAD.
REVIEW YOUR UNDERWRITING STANDARDS
Tighten them, perhaps, even if the result
is simply to send a message or, better
yet, identify cracks before it's too late.

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JOIN. ENGAGE. LEAD.
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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JOIN. ENGAGE. LEAD.
REAFFIRM BUSINESS STRATEGIES
AND RISK APPETITES
Reaffirm business
strategies and risk
appetites with the
heads of
businesses to
ensure the
organization is
looking 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 no doubt 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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JOIN. ENGAGE. LEAD.
HOLD THE BUSINESS TO AGGREGATE
GROUP EXPOSURE LIMITS
• This places the
discipline back on the
business to manage
and ensures overall
hold levels are
maintained.
Stay measured on
individual hold levels
and granting
exceptions where
warranted, and 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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JOIN. ENGAGE. LEAD.
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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JOIN. ENGAGE. LEAD.
ENCOURAGE GREATER 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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JOIN. ENGAGE. LEAD.
GET WORKOUT TEAMS WORKING SOONER
AND MORE CLOSELY WITH THE LINE
• 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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JOIN. ENGAGE. LEAD.
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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JOIN. ENGAGE. LEAD.
For additional information about
credit risk management,
visit
www.rmahq.org/credit-risk/
LEARN MORE

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JOIN. ENGAGE. LEAD.
Visit http://www.rmahq.org for information on risk management.
RMA is a member-driven professional association whose sole
purpose is to advance sound risk principles in the financial services
industry.
RMA helps its members use sound risk principles to improve
institutional performance and financial stability, and enhance the risk
competency of individuals through information, education, peer
sharing, and networking.
Become a member today.
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