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Susan Schmidt Bies |
In a recent speech to members of the US’s National Credit Union Administration at the 2007 Risk Mitigation Summit in Washington last week, Ms Susan Schmidt Bies, Member of the Board of Governors of the US Federal Reserve System told the audience that the key issues were adapting to institution size, including strategic constraints such as risk appetite, and integrating with the whole business process.
Bies, an ex-chief risk officer at a commercial bank in addition to a supervisor and central banker, called for all financial institutions to strengthen risk management, but that the specific methods for improving risk management should depend on the size and level of complexity of the institution. Enterprise Risk Management (ERM) provides a framework within which managers can see how the organisation's risk exposures are changing, determine their risk appetite, and ensure that they have controls in place to limit risk to targeted levels. She commended the COSO framework as “a useful way of looking at ERM”.
Bies advised that risk should be part of the budgeting and strategic planning processes which would help in avoiding only the "the most likely" outcomes and lead to the inclusion of most risks and the amount expected in implementing plans. “While smaller organizations will not find it practical to try to quantify many of these changes, the direction of change in and of itself is very important in the planning process.”
Bies commented that “I think this is the practical way for smaller organizations to implement ERM. Small organizations cannot afford to have dedicated staff and quantitative models of all forms of risk. By adding steps to existing management practices, management can lower implementation costs, but more importantly can increase attention on risk management by staff throughout the organization.”
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