enterprise risk management for us operations of international banks communication and education
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Enterprise Risk Management for US Operations of International Banks Communication and Education. Enterprise Risk Management. Challenge: Effectively managing all risks of US Operations while meeting both regional and enterprise requirements concurrently. Market Risk Credit Risk - PowerPoint PPT PresentationTRANSCRIPT
Enterprise Risk Management for US Operations of International Banks
Communication and Education
Madison Consulting Group
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Challenge: Effectively managing all risks of US Operations while meeting both regional and enterprise requirements concurrently
Enterprise Risk Management
Market Risk
Credit Risk
Operational Risk
Legal and Regulatory Risk
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Enterprise level market and credit risk management programs in force are generally well established
Market and Credit Risk Management
Market Risk
Credit Risk
Operational Risk
Legal and Regulatory Risk
It is a core competency of financial institutions to effectively manage market and credit risks. The recent challenges have been marked by liquidity issues and lack of reliable market data, highlighting continued dependency on human judgment factors and the need for greater transparency.
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Increasing emphasis on operational and legal/regulatory risk management have increased the urgency to addressing human aspects of these risk programs
Operational and Legal/Regulatory Risk Management
Market Risk
Credit Risk
Operational Risk
Legal and Regulatory Risk
US legal framework and regulatory oversight has placed much greater emphasis on operational (Sarbanes-Oxley) and legal/regulatory (BSA and Patriot Acts) risks, forcing financial institutions to enhance these enterprise programs to encompass these new requirements.
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“Indifference” Risks
The risks of home office not understanding and integrating US market issues and requirements can potentially result in cost and/or reputational consequences
Continue operating under existing enterprise risk management programFailure to
integrate US issues and requirements in the enterprise risk program
Create supplemental risk management programs customized to meet US issues and requirements
Insufficient controls from US regulatory perspective will risk reputation exposure – written orders and fines
Duplicate expenses Compliance Administration Technology
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Two-Way Education
A key challenge for management of US Operations is to communicate and help educate home office where US issues and requirements may differ from the existing enterprise risk management framework
Enterprise Risk Program
Market and credit risk management Operational risk management program Customer identification and verification documentation program Anti-money laundering monitoring program
US Issues and Requirements
US market and economic conditions and trends Sarbanes-Oxley Patriot Act Bank Secrecy Act / Anti-Money Laundering Requirements and
Regulations
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Key to Success – Education Strategy
Not just training, but educating staff to make informed decisions Understanding both process and policy issues
Continuous education to meet rapid market changes Top down and bottom up input into program content
On-the-ground findings from operating staff Front-line feedback from the market and regulators
Integration of education program across home office and all regions Program consistency across the enterprise Ensuring staff understand relationship between local and
enterprise requirements
A well designed education strategy will improve the effectiveness of the enterprise risk programs and ensure the programs evolve as requirements change
The goal of an effective education program is to make the staff the key component of a successful enterprise risk management program
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“Outside the box” thinking of how to develop and effectively manage an education strategy for the enterprise risk programs
Education Program Example
Using social networking construct Wiki based education modules to permit dynamic updating Blogs to inform on latest market and regulatory issues Personal pages of staff informing key areas of expertise “Latest news” for ongoing communication between regions
and home office on key areas of interest and concern Topic examples
Global economic risks Risk and pricing models BSA/AML regulatory findings and issues Operational risks and losses
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Issue Example (1)
Lack of understanding by home office of importance placed in US on accurate and detailed customer typing, results in US regulatory finding of inaccuracies for home office customers conducting business in the US
Customer Typing Information
Home Office
N, C, S America
Europe
Asia
BSA/AML Customer Identification Program
Management and Financial Reporting
Regulatory Reporting
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Issue Example (2)
An un-integrated education program, where training provided to staff was limited to local region procedures for collection of KYC verification documentation, results in US regulatory action because US clients originating elsewhere were not adequately on-boarded originally, or re-boarded in the US, to meet US KYC requirements.
RegionA
RegionB
Region C Credit
Know-Your-Customer Documentation
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Madison Consulting Group30 Montgomery StreetJersey City, NJ 07302
201-434-5678
Bernard ChenPartner