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6 Features Your FI Needs in a Risk Management Solution

author Michael Berman
3 min read
Apr 1, 2021

Remember the good old days when credit risk was the only risk that mattered at a financial institution and a spreadsheet could get the job done just fine?  

It’s a hazy memory at best—one that’s been replaced with a variety of evolving and emerging factors in a risk environment that is constantly changing. We’ve learned that a single risk is capable of impacting your entire enterprise, making risk management essential to success.  

Related: Creating Reliable Risk Assessments

 

As you look for new and better ways to identify, assess, mitigate, and monitor risk, think about what an effective enterprise risk management (ERM) solution would need to look like to be effective for your institution. 

To get you started, here are the top six features to look for in an enterprise risk management solution: 

  1. Easy to use 
  2. Manages every stage of the risk management lifecycle 
  3. Provides risk assessments that quantify risk 
  4. Demonstrates risk across the enterprise 
  5. Exam ready 
  6. Tailored to your institution

    1. Easy to use. If a solution isn’t easy to use, your institution isn’t going to use it—or use it to its full extent. Search out a solution that makes intuitive sense and that comes with unlimited training and support to get you up and running. If you’re new to ERM the process can also be simplified with access to experts who can help develop a customized ERM plan that aligns with your institution’s strategic goals. 

    2. Makes it easy to manages every stage of the risk management lifecycle.A good risk management solution facilitates organization to make it easy to identify, evaluate, measure, and monitor risk. 

    From risk ratings and reporting to task management, your risk management solution should automate as many processes and procedures as possible to reduce the time your institution dedicates to enterprise risk management. That frees up resources for interpreting data for more strategic decision-making.

    It’s also helpful if it integrates into other solutions, such as findings management, to reduce the risk management workload. 

    3. Provides risk assessments that quantifyrisk. Risk management is all about ensuring an institution is operating within its risk tolerance. That requires the ability to calculate inherent risk (or the likelihood of an incident will occur and its impact on the institution if there were no controls in place) and residual risk (the risk that remains after considering a control’s impact and effectiveness).

    A good risk management solution lets an institution assign and assess multiple controls per risk, allowing for comprehensive, quantifiable risk assessments. This makes it easy to understand how well controls are mitigating risk, as well as where and whether the institution is exposing itself to too little, too much, or a comfortable amount of risk. If it’s not quantifiable, you won’t get an accurate picture of risk.

    Related: The $30 Million Spreadsheet: The hidden costs of spreadsheets–and their mistakes

    4. Demonstrates risk across the enterprise. The days when credit risk was the main risk facing financial institutions are long gone. Today FIs must also focus on operational, cybersecurity, compliance, transaction, reputation, and third-party vendor risks—among others. 

    A good risk management solution comes with the ability to assess both financial and non-financial risk exposure to give you a holistic view of your institution’s overall risk exposure.  

    5. Exam ready. A good risk management solution keeps your FI organized so that you can instantly pull up risk reports and data that demonstrate your risk management efforts and its results. It should provide continuous monitoring that makes it easy to assess current risk at a moment’s notice. Bonus points go to solutions that offer read-only access for examiners to save both the FI and examiners time. 

    6. Tailored to your institution. Risk management involves numerous assessments with a critical eye towards controls and risks. It’s not always easy to know where to begin—and every financial institution approaches risk management slightly differently depending on its size, complexity, location, business lines, and other factors. 

    Look for solutions designed for financial institutions and the risks they face. Prebuilt and configurable risk assessments make implementing a risk management solution easier, whether relying on existing risk assessment processes or building new ones. Built-in control and risk libraries can give an institution a head start with insights into potential approaches. Risk ratings should be customizable. 

Want more information on risk management best practices? Visit our Risk Management Resources Page. 

Related: Managing Risks Like An Astronaut

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