Risk Management Services
Our team recognizes that organizations face risks from all directions and it can be challenging to identify, predict and respond to them effectively. That’s why we encourage organizations to approach risk differently by embracing disruption and turning risk into a competitive advantage. Building trust, confidence, and value are crucial for organizations to thrive in the next decade. Our team helps organizations to build resilience, which enables them to withstand unexpected threats and come out stronger. Resilience is imperative for companies. We assist our clients in understanding risk and resilience by implementing practical solutions that prepare them for the future.
To create a comprehensive strategy covering risk, business, and cultural dimensions, we leverage our industry and functional expertise. Our team employs a best-in-class framework and toolkit for managing risk effectively, including determining risk appetite, strategy, and organization; implementing key risk processes, tools, and systems; and fostering a strong risk culture. We can also create customized frameworks to meet specific client needs.
Our approach to operational risk stress testing is structured and calibrated, supported by a team of former regulators, and proven to assist institutions in meeting regulatory requirements.
3 lines-of-defense (LOD) model and its evolution
CROs are calling for greater collaboration across different risk management functions as expectations on the risk function evolve. According to them, the first line of defense, which owns specific processes and operations, has become more skilled in risk management and is now capable of taking on additional risks, including underwriting, collections, fraud management, and, in some cases, designing regulatory models.
As a result, the three-lines-of-defense model is evolving to focus the risk function more on second-line responsibilities, such as setting and monitoring risk appetite, establishing policies, the challenge role, and controlling and reporting. The risk function should also enhance its proficiency in cybersecurity, technology security, and climate change to be effective in its second-line role.
Our experience indicates that while financial risks have clearly defined roles and responsibilities for the first and second lines, this is less so for non-financial risks.
New risk priorities in the new year
Banks may face increased costs in the short term due to rising risk levels. Low-cost market entrants, including FinTech’s, are challenging traditional business models.
CROs are divided on whether risk budgets will increase or decrease in the future. Banks leading the digital transformation of risk management are likely to see a reduction in real spending, as they drive cost reduction programs at the group level. According to most CROs, risk budgets will reflect shifting priorities and maturity in managing various risks.
Credit risk has decreased by 5% over the past two years, but other risks such as model risk, climate risk, and technology-related risks are expected to become increasingly important. These changes are likely to affect the risk skill mix rather than the size of the function.
Demonstrating value as a risk function
In the past, banks’ risk and compliance departments were primarily concerned with establishing frameworks and processes to manage risk identification and assessment, monitoring and reporting, and remediation. However, today, organizations are increasingly focusing on the value that these functions can provide.
By prioritizing value, banks can shift their attention and resources away from bureaucratic documentation exercises and toward achieving business outcomes and executing strategies effectively. This approach can help simplify processes and controls, reduce unprofitable products and services, and consolidate risk assessments, leading to more efficient processes and controls.
Ultimately, prioritizing value can improve institutional performance by minimizing losses and reducing capital requirements for potential large-scale events. Institutions that prioritize positive outcomes are better able to serve all stakeholders, including customers, investors, and regulators.
I. Enterprise risk assessments
II. Compliance risk management
III. Risk and control self assessment
IV. Risk quantifications
V. Compliance advisory
VI. Regulatory readiness
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