3 Tips for Developing an Effective Risk Management Strategy
Do you want to ensure the future success of your financial institution?
It’s all about risk and reward!
As a result, it will be difficult, if not impossible, to get where you want to go without a robust risk management strategy.
A strong risk culture will undoubtedly help keep you out of trouble. It’ll help protect your organization from unnecessary financial losses, regulatory issues, reputational damage, and the impact of unexpected crises.
Taking a proactive and integrated approach to risk won’t just help you deter and defend against threats. It will also unlock many new opportunities for growth and innovation.
You’ll make better, data-informed decisions about:
- How much risk you’re willing to take to achieve your goals.
- Bringing new profitable products to market.
- How you select and maintain relationships with the 3rd party vendors and partners you rely on to propel your institution and its customers forward.
3 Crucial Risk Management Strategy Tips:
Risk Management Strategy Tip #1: Define Your Risk Appetite
Your risk appetite is the amount and type of risk you are willing to take in order to meet your strategic objectives. Therefore, understanding your risk appetite impacts how your institution can safely grow and change.
Here are some tips to get you moving in the right direction:
- Define your risk appetite by considering the skills and resources required to manage risk throughout your institution.
- Identify Key Risk Indicators (KRIs) you must monitor as part of this management.
- Review your risk appetite regularly to account for changing industry conditions and internal changes to your institution.
Risk Management Strategy Tip #2: Communicate Risk Effectively
Learning how to engage your board is crucial. With so much information to report on, it’s easy for less pressing data to overshadow critical points. One helpful strategy for managing these conversations is maintaining the agenda. The meeting agenda is a powerful tool a risk manager can use to ensure areas with the highest importance are acknowledged and communicated, fostering risk management buy-in from your board.
Risk Management Strategy Tip #3: Build a Proactive Risk Culture
The regulatory environment is always changing. As a result, your ERM program should be responsive to the constant tide of regulatory requirements and demand. The same is also true of emerging risks. Your institution should establish an ERM program that is flexible enough to mitigate emerging risks before they can seriously threaten your organization.
In Closing:
Do you want to build a modern risk management program that keeps your organization safe from the threats of today and tomorrow, including cybercrime, employee turnover, and shifting regulatory requirements? It will require a shift in thinking and a holistic, organization-wide approach. The institution as a whole needs to focus on identifying risks and implementing the best risk-mitigating practices possible. Complete understanding, effective communication, and an agile ERM program work together to create this holistic approach.
Next Steps:
- Need some guidance on the next steps? Our team of experts is here to help. Contact us to start a conversation.
- Want to learn more about risk management? Check out our resource library.
- Check out the replay from our recent webinar: What Financial Institutions Need to Know (And Do) To Reduce Their Cyber Risk Exposure