Independent Review of Risk Management Framework
Risk FrameworkFramework
A risk management framework, is a structured approach that organizations use to identify, assess, manage, and monitor risks. It provides a systematic way to handle uncertainties that could negatively impact an organization’s objectives.
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Overview of Topic
An independent review of the Risk Management Framework (RMF) and Functional Audit in banks and asset management firms is crucial to ensuring sound capital management and provide assurance to key stakeholders (shareholders, Board, customers and others).
Key components of a risk framework typically include:
Risk Identification: This involves recognizing potential risks that could affect the organization. Risks can be of various types, including financial, operational, strategic, legal, and reputational.
Risk Assessment and Analysis: Once identified, risks are assessed in terms of their likelihood and potential impact. This helps in prioritizing which risks need more immediate attention or resources.
Risk Mitigation Strategies: Based on the assessment, strategies are developed to mitigate risks. This can include avoiding, transferring, sharing, or accepting the risk, depending on its nature and severity.
Implementation of Controls: Appropriate controls and measures are put in place to manage or mitigate identified risks. These can be preventive or detective controls, such as policies, procedures, or technological solutions.
Monitoring and Reporting: Regular monitoring of risk management processes and controls is essential to ensure effectiveness. Risks and their management should be reported to relevant stakeholders, including management and, in some cases, external bodies.
Review and Adaptation: A risk framework is not static; it needs regular review and adaptation to respond to new risks or changes in the external and internal environment of the organization.
This structured approach allows organizations to make informed decisions, allocate resources effectively, and enhance their resilience against potential adverse events.
Significance in Today's Landscape
Recent instances of corporate downfalls underscore the dire consequences of inadequate risk management. The failures of prominent banks in 2023 were attributed to risky business strategies and frail risk management frameworks, particularly as they pursued rapid growth supported by less stable funding. Actions by executive leadership in these banks further spotlight governance flaws, as evidenced by significant stock sales shortly before one bank’s collapse, hinting at potentially poor risk management and governance practices.
Without a robust risk management framework, companies are perilously exposed to multifaceted risks that can swiftly escalate into existential threats, thus imperiling stakeholders’ interests and the broader financial ecosystem.
WHO DOES IT IMPACT?
All firms with a risk management capability
How Can We Help?
Our assistance can be specialized or comprehensive, encompassing guidance on documentation, data management, and procedural workflows. We offer to perform a thorough gap analysis compared to industry best practices and regulatory standards, along with furnishing comprehensive recommendations. Additionally, we are equipped to aid in resolving any identified issues. Further details can be found below:
The following steps can summarise it:
1
Policy Review
Our risk management experts assess the adequacy and effectiveness of risk management policies in place, ensuring policies are in line with regulatory requirements and industry standards.
2
Procedure Assessment
Our senior risk consultants evaluate the efficacy and efficiency of risk management procedures, identifying areas for improvement to ensure robust risk identification, assessment, and mitigation.
3
Data Quality Inspection
Our technical risk managers assess the accuracy, completeness, and timeliness of risk data, ensuring data integrity for informed decision-making and accurate risk reporting
4
Reporting Evaluation
Our risk SMEs assess the effectiveness of risk reporting mechanisms, ensuring timely and accurate communication of risk positions to stakeholders
5
Measure Examination
Our quantitative risk quants can evaluate the appropriateness of risk measures employed, identifying any gaps or inconsistencies in risk measurement and suggesting improvements.
6
Governance Review
Our senior risk specialists will assess the structure and effectiveness of risk governance frameworks. This will ensure clear roles, responsibilities, and accountability in managing risks.
7
Implementation Assessment
Senior risk professional evaluating the execution of risk management strategies and plans to identify any areas of non-compliance or inefficiency and recommending corrective actions.
8
Benchmarking Against Best Practices and Regulation
Our most senior risk experts assess the existing risk management framework against industry best practices, regulatory requirements, and strategic objectives, providing recommendations for alignment and enhancement to achieve a mature and resilient risk management framework.
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