Smart Risk Management Solution | Risk Management Compliance

1. THE 1ST LINE RISK MANAGEMENT Risk management compliance Lessons Learned from the 1st Line Risk & Control Professionals Deep Dive

2. INTRODUCTION Intelligence for Risk & Control Professionals (1LoD)m and our good friends hosted an event earlier this year to share observations specific to the 1st line of defense. Here are my key findings from the event and the report that followed.

3. RISK MANAGEMENT STRATEGIES Risk management is a vital strategy for every organization and should be regarded as an equal partner for all proactive aspects of the business. Most regulators and banks are already taking a proactive stance surrounding the assessment of risk and creating mitigation strategies in response to the potential implications of a breach.

4. Operational Risk Management The first line of defense is more than an admin and evidencing function – it’s a critical component of operational risk management KEY TAKEAWAYS Needs to be overhauled Nearly half (47%) of bankers surveyed feel the 1st line needs to be overhauled to be inclusive of assessing non-financial risk 3-lines model Organizational challenges and inadequate bank collaboration reduce the effectiveness of the 3-lines model

5. OVERHAULING THE RCSA Attendees pointed out numerous shortfalls in the current instance of the RCSA. Too many risks were not recorded, and a full revision was suggested by many. It’s a delicate subject given that “things have been done this way for so long.” Change is hard for most organizations. But not everyone supports the move away from an episodic risk evaluation toward a combination of annual, daily, hourly, and on- demand assessments of risk and control effectiveness.

6. THE TECHNOLOGY smarter risk management solution Less than half of the attendees believed there to be any automation in their controls. A desire for better data analytics and enhanced data quality were common themes. One concept that emerged from the discussion is a shared need to have some language or documentation as justification for the investments in technology. Requesting a budget for new tech is only one side of the equation GAP The sheer volume and level of “noise,” particularly for messy, rich data like e-Communications, is exacerbating the challenges of implementing a smarter risk management solution.

7. CONC LUSION More Work to Be Done Fundamentally, things need to change across the industry. When it comes to developing and applying a structured approach to 1st line efforts, 25% of financial firms still have this in progress, over half of firms surveyed only have a partial/incomplete assessment of the need, and 60% of firms admit to being unable to solve 1st line problems due to a lack of clearly defined risk and control responsibilities.

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