<img src="https://ws.zoominfo.com/pixel/pIUYSip8PKsGpxhxzC1V" width="1" height="1" style="display: none;">

Risk Management Policies

1 min read
Nov 13, 2018

Risk management policies are policies that leaders and managers create, and all members of the organization follow, to reduce or manage risk. These policies may address any kind of risk, from compliance risk to reputation risk.

The leaders of a financial institution are responsible for developing risk management policies. Any risk management policy needs to be consistent with the overall strategies of the company. These high-level decision-makers use the data presented to them by their managers to choose how to treat each risk as a standard policy. They also define the ways managers will be accountable for meeting these strategic risk management tasks. They find and contract for any resources needed to put the risk policy into place.

Senior managers are the ones who set the plans and priorities of the leaders into motion. They implement the risk management policies and ensure that they are fulfilled. They review the policy after it has been in place and advise the leaders about how effective the policy is and what changes might be helpful. Employees need to put the risk management policies of the FI into practice daily and operate according to the priorities established by the managers.

Effective risk management policies can include 

  • screening employees before hiring

  • having business continuity plans

  • developing low-risk lending policies

  • creating effective capital management policies

  • dealing appropriately with customer complaints 

  • training employees

  • analyzing and managing contracts

  • reporting incidents

  • ensuring privacy

  • ensuring compliance with all regulations and standards

  • ensuring I.T. security

  • maintaining appropriate confidentiality

  • following ethical practices

  • monitoring vendors

  • dismissing employees who pose a significant threat.

Setting and evaluating risk management policies are both important parts of an ongoing process within the scope of enterprise risk management. Without having effective risk management policies in place, the bank is likely to suffer losses in the coming months and years. With the right policies, the institution can maintain its current stability and have the ability to gain and grow.

Learn more about operational risk management and third party risk management policies


Related: Creating Reliable Risk Assessments

Subscribe to the Nsight Blog