In the wake of the financial crisis, banks are thinking more strategically than ever before about how to manage risk.
Through Risk Management banks are seeking to gain a more advanced risk view and utilize the benefits of enterprise risk management (ERM) to improve business performance in both the short and long term.
Michael Fadil, SVP, Corporate Risk Management at SunTrust Bank is a speaker at the marcus evans Enterprise Risk Management in the Banking Industry Conference taking place on July 14-15 in New York.
During the recent recession the failure of institutions to understand the interconnectedness of businesses may have helped exacerbate the negative impact on the institutions themselves and on the entire global financial system, Fadil explains.
Living wills are now playing an integral role in sound risk governance and risk management, he notes.
“A bank’s Recovery and Resolution plan is a way to articulate and document that a financial institution understands the intricacies of the interconnected nature of businesses in the organization. In theory, most institutions should have 80–95 per cent of the information being requested. The reality is that even though most do, it is spread across dozens of key individuals across the institution and not well organized.
“The process of organizing this information centrally and clearly articulating how all of the pieces are interconnected will help ensure that an institution understands the complex nature of various aspects of the business and thereby advance risk management and governance at most financial institutions.”
Whether even the best, most timely plans can anticipate the next crisis is a pertinent point, he adds.
“One needs to separate the Recovery Plan component of living wills from the Resolution Plan component. Few, if any, would assert that the Resolution Plan will help anticipate the next crisis. Some, however, will make that assertion regarding the Recovery Plan.
“I would argue that in and of itself, the Recovery Plan will not and should not necessarily be effective with regard to anticipating the next crises; rather, it will ensure that financial institutions are anticipating how they would think about the organization as a crisis begins to become evident.”
The marcus evans Enterprise Risk Management in the Banking Industry Conference will take place on July 14-15 in New York.
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