Smith & Wilkinson’s Post

🗣 OakNorth's new chief risk officer Mark Steele and outgoing CRO James Cashmore, who is retiring, spoke to Ellesheva Kissin about the UK Challenger bank's overall management of risk and its expansion into the US. 👀 The bank's risk function is split into five teams that specialise in operational risk, IT and cyber compliance, financial crime, prudential risk and enterprise-wide risk. 🌍 Numbering fewer than 30 people in an institution of 700, the function outsources some roles to its operations in India. “We’re leveraging technology so [we] don’t need to keep building teams, and keep adding headcount,” Cashmore says. 🏢 “We don’t have entire teams or entire floors of people in Canary Wharf, looking at the risk, but in some ways, maybe that makes it easier to manage because … with additional humans, you have additional risk of human error.” 🏰 On following the traditional three lines of defence model, Steele says: “[I’ve] seen lots of structures in my time: one, two, three, one-and-a-half and everything else. Fundamentally, it comes down to collaboration, openness and an understanding of the risk profile at every line of defence.” 🔇 The bank’s three lines get together every month to debate the top risks, says Cashmore: “I don’t think our top risks are different to any other bank … (we) obviously watch liquidity very carefully. We plan our capital ahead, so we’ve got plenty of capital for our growth trajectory. And we spend a lot of time of course on credit risk, (which is) really one of our specialisms.” 💡 The risk function is part of a new wave of thinking: to be closer to the front line. Cashmore explains: “[It] can be seen unfairly, I think, sometimes as a blocker. What we’ve tried to be is an enabler … actually getting involved in the design stage, in the test and learn stage. We go a little bit beyond the traditional three lines of defence model.” https://lnkd.in/eqfxfbkT #1LOD #3LOD #riskmanagement

Regulators Are Making it Clear: Banks & FinServ Firms Must Become Resilient Under increased scrutiny from regulators, firms must prioritize compliance and ensuring proper risk management and internal controls are in place. Reach to learn how RapidRatings can strengthen your firms third-party risk management program. #thirdpartyriskmanagement #tprm #regulatorycompliance #financialservices #banking #vendorrisk #vendorriskmanagement #vrm https://lnkd.in/e-pkyC9k

Strengthening Operational Risk Management in Microfinance Institutions #RiskManagement #OperationalRisk #MicrofinanceInstitutions #CreditProcesses #MFIs #Financial_Inclusion In the dynamic world of microfinance, Microfinance Institutions (MFIs) face a myriad of operational risks that require robust management strategies to ensure the stability and growth of their operations. In the context of MFIs, operational risks can have significant implications on their core functions, such as loan disbursement, cash management, and client data security. To address these challenges, MFIs should adopt a structured approach to operational risk management, encompassing the following key elements: 1. Robust Internal Controls: Strengthen internal control mechanisms, including segregation of duties, dual authorization processes, and regular audits to mitigate the risk of errors, fraud, and unauthorized access. 2. Automated Processes: Invest in technology-driven solutions, such as loan management systems and mobile banking platforms, to streamline operations, reduce manual processing errors, and enhance data integrity. 3. Comprehensive Training and Development: Equip staff, especially front-line personnel, with ongoing training on risk identification, escalation procedures, and customer service best practices to enhance their risk awareness and response capabilities. 4. Effective Monitoring and Reporting: Implement comprehensive risk monitoring and reporting frameworks, leveraging data analytics and key risk indicators to identify emerging threats and enable timely intervention. 5. Business Continuity Planning: Develop robust business continuity and disaster recovery plans to ensure the resilience of MFI operations in the face of unexpected disruptions, such as network failures or natural disasters. 6. Collaborative Risk Culture: Foster a risk-aware culture across the organization, encouraging open communication, cross-functional collaboration, and a shared understanding of operational risk management responsibilities. By adopting these best practices, MFIs can strengthen their operational risk management capabilities, enhance the resilience of their business model, and build trust with their clients and stakeholders. This holistic approach will enable MFIs to navigate the dynamic microfinance landscape and seize growth opportunities while safeguarding their operational integrity.

As someone who hasn’t held back ones views ever, I wouldn’t hold back on this one for sure, as I am appalled, disgusted and yet motivated to step up the awsrensss drive globally on need for robust risk management set up in every organization that wants to grow and succeed in an ethical mannner. I would love to hear views, as to why this stand alone isn’t a grievious enough management override that should qualify for full blown investigation by multiple regulators, and if indeed found to be an over ride it should call for monetary penalty on the organization, the individuals involved and include black listing such management/ leader from holding any position of responsibility for the longest time. As a caveat I would clarify my reaction to be based on the assumption that facts as disclosed in the article are factually accurate and not politically or otherwise doctored or misrepresented. How can any “Risk” professional be axed for being a “blocker” when in reality Risk Management is the break in the car in an organization, which allows one to drive at the optimal speed or sometimes even go on the over drive, with the assurance that there are guardrails to throw up red flags as soon as required. It more than anything potentially reflects the Stone Age headset of those archaic leaders whose years of experience actually are the biggest stumbling boulders for an organization’s progress. If indeed 150 of the existing Risk professionals were the wrong set of skillsets that the Bank carried for all these years, then that potentially calls for another investigation as to how come that never got picked up for all these years and how were various stakeholder groups put at such unbelivabke levels of risk for so long? Read any which way, things don’t sound right…

As my 24+yr career at Credit Suisse comes to an end all I can say is that it’s been a blast. CS hired me in NY in '99 as a Latam Credit Officer & gave me the opportunity to become their Chief Credit Officer and eventually their Chief Risk Officer of CS in Mexico. Highly structured loans, innovative asset backed deals, complex derivatives & trading strategies were the norm during my tenure at CS & I loved every minute of it. To my Front Office colleagues, past & present, it has been a blast & thank you. Managing the risk in your businesses was not only a challenge, but it was utterly enjoyable. Thanks for the transparency & partnership throughout the years. You guys made my job fun, and I truly enjoyed being part of building our IB Latam franchise that ranked in the top 3 for nearly 20yrs. CS gave me the liberty to develop a Risk Management infrastructure in Mexico that was first in class. The intraday tools we’ve built (VaR, Sens by counterparty, full-reval stress scenario, LCR etc.) enabled my team to anticipate issues in the market & to develop defensive strategies to avoid losses when necessary. These tools & the performance of my team avoided losses with countless counterparties throughout several financial crises. CS gave me the freedom to hire & develop risk managers that reflexed the image I had of an ideal team (intelligent, hard-working, analytical, highly technical, challenging, efficient, forward-thinking, cross-trained, and fearless). The members of my team (past & present) would take an idea vetted in a brainstorming session, to a proof of concept, then into production in a short period of time. They fully understood the risk in their portfolios, regularly assessed potential issues & constantly updated their exit strategies when necessary. This pro-active risk management approach avoided losses & enabled us to act quickly when market conditions turned. To my team (past & present) you will never fully understand how appreciative I am of each of you. Your pride, focus and dedication has led to our success & each of you are rockstars in your own light. CS gave me the opportunity to work with unbelievable partners in the back office. From the New Business group led by Darren & Tom to my colleagues in IT, GC, FA & Ops that were instrumental in helping me build out my intraday risk management tools. You guys worked with my area to build tools that are several gens ahead of the market & I hope you are as proud of that as I am. Lastly thank you Credit Suisse, not only for the good times, but even more so for the challenging times. I believe one should learn from one’s mistakes, but it is equally important that we learn from other peoples’ mistakes. Good leadership can build a top tier investment banking Latam franchise for nearly 20yrs, but unfortunately, bad leadership can quickly destroy it. It’s been an amazing run & I can honestly say that CS has prepared me to take on any future challenge head on. Thanks CS it’s been a blast.

Lloyds Bank axes risk staff after executives complain they are a ‘blocker’ "Lloyds Banking Group plans to cut jobs in risk management after an internal review found the function was a “blocker to our strategic transformation”." #valuepreservation #corporategovernance #riskmanagement #compliance #internalaudit #corporatedefense #boardofdirectors https://lnkd.in/ewmw_nyr

Why Ongoing Risk Monitoring Is Crucial for Bank Compliance, via Forbes https://lnkd.in/eHun_3fs #banking #compliance #riskmanagement

Operational risk is a silent yet formidable challenge that significantly impacts lending institutions and #creditmanagement management. In the dynamic landscape of financial services, the potential threats arising from operational failures, such as system breakdowns, human errors,compliance risk,data security risk,process risk, or even external fraud, can have cascading effects on a lender's ability to manage credit effectively.  These #risks , if not mitigated with robust #operational risk management strategies, can lead to financial losses, reputational damage, and, most crucially, compromise the institution's ability to uphold the trust of its stakeholders. Managing the complexities of credit management requires not just a keen understanding of #financial metrics but also a proactive approach to identify, assess, and mitigate operational risks, ensuring the resilience and stability of #lending institutions in an ever-evolving financial landscape.

Banks are confidently navigating the potential challenges in the commercial real estate market with sophisticated risk management strategies, technological advancements, and stringent regulatory compliance. #CommercialRealEstate #BankingSector #RiskManagement #FinancialStability #CREInvestments #TechnologyInBanking #SustainableInvesting https://lnkd.in/drb5GVVY

Community banks and credit unions are facing increasing regulation and scrutiny while working to innovate and improve the customer experience. According to Wolters Kluwer, regulatory fines imposed in 2023 were $3.9 billion vs 1.3 billion in 2002. Smaller community banks and credit unions cannot afford steep fines for regulatory mishaps. CEOs and executive teams must do more with less. So how do the top community banks and credit unions develop a talent strategy that drives innovation and stays ahead of compliance issues? They work with a Fractional Chief Risk Officer. Talent-focused CEOs understand the power of adding a Fractional Chief Risk Officer to the team. They know when to make this strategic move - ✅When their bank or credit union does not have a Chief Risk Officer on staff, they know the void creates extreme regulatory risk. ✅When the senior team lacks the necessary skills to navigate the regulatory environment. ✅When the bank or credit union does not have the budget for a full-time Chief Risk Officer. ✅When fresh perspectives are necessary, or you are facing critical business challenges. The top Community Banks and Credit Unions know that by engaging a fractional Chief Risk Officer, they will - ➡️Access cost-effective leadership and expertise ➡️Add a seasoned industry expert to the team. ➡️Be able to leverage hands-on talent at a fraction of the cost. ➡️Be able to obtain faster results and gain new perspectives. ➡️Increase the proactive approach to regulatory compliance. So, remember, engaging a fractional Chief Risk Officer is a sound addition to any community bank or credit union’s talent strategy. Please consider resharing this if you found this post useful.