Risk

Reporting from Risk Americas Conference

October 22, 2019

Risk Americas – Downtown Marriott, New York City. May 16-18, 2018

The conference was dominated by several themes. Reiterated by speakers, panels and breakout sessions, each focusing on a specific job function or micro/macro-industry topic. A common focus for companies must be continual monitoring and updating of risk. Risk and the business. The business and risk. They are the same, not silos. The core responsibility of all companies is to do their best to stay ahead of the curve. Business and risk must move in the same direction. Boards and executives are currently blind. Not because they can’t see, rather the current methods of reporting, data volume and pace of change is unmanageable, rendering information they need to make firm-wide decisions of little or no use.

Massive investments in technology and personnel over the past decade must be taken a step further to prove their ROI. Risk is a constant in business as with everyday life. It cannot be eliminated, only mitigated to best of our abilities. To what extent will our business and stakeholders be affected negatively and how can we discover opportunity? There will always be blind spots. The goal is continual progress coupled with humility to the realities of imperfection.

Risk Granular / Risk Enterprise

Risk management at the model and silo level must constantly challenge the status quo. The sciences and arts involved in granular risk discovery and analysis are time consuming. They are tedious requiring highly skilled engineering and mathematical skill sets and are dependent on accurate data inputs. As stated earlier. For the past ten years, vast dollar amounts have been spent to clean up and create risk silos in response to regulatory edicts and stakeholder demands.

A fallacy is the perception that the job is over, that the task is done when in fact it is only beginning. We cannot rest on our laurels. Risk at the enterprise level is the culmination of granular silo investments throughout a company in data, models, systems and personnel. At the conference and in our day to day business, we know that enterprise risk is failing at the executive and board levels and that the cultural unification of risk and business from top to bottom is practically nonexistent. Get ahead of the curve during calm markets while time allows. People trust the financial industry with their most sensitive data, their financial livelihoods, their present and their future.

Out of silos, resultant risk analysis, both quantitative and qualitative must be simplified. Simplification and reporting must be the same language from day to day desk jobs to executive and board meetings. Enterprise risk management simply put is about summary reporting and uniformity. Granular silo risk work are the components, it must constantly evolve. However, business culture must understand the workflow and necessity of enterprise risk.

Risk Americas: Four Themes

Kudos to the regulatory regimes and the innovation of financial market participants for creating a much sounder, safer banking and financial environment through hard work and expense. The four themes of Risk Americas were: Technological Innovation & Understanding. Liquidity Risk and Funding. Risk Modeling (CECL, Stress Testing, Model Validation & Management). Operational & Enterprise Risk.

In each of these four topics there were multiple learning sessions, panel discussions and guest speakers. Sharing their knowledge, experience, strength and insights on individual subtopics that are specialized. Speakers and presenters were executives and subject matter experts from the biggest well-known companies as well as mid-size and small firms representing banking, asset management, federal banks and regulatory firms.

Technological Innovation and Consulting. A CISO’s top challenges at present are lack of in-house technical expertise, budget cuts and support from the top. Tech innovation firms with expertise in niche requirements can offset these stresses and reduce time and cost of CISO’s and Risk.

Laser focus on CECL, the most significant accounting regulation in decades took center stage in the category of risk modeling on day one of the conference.  The bottom line on CECL: Get ahead of the curve and pick a vendor (Disclosure: SRA owns CECL model technology and has best in class expertise).

Liquidity risk and capital reserves. Can we raise capital and how long can we bleed before we die? This is what is boils down to and why model creation, validation for stress testing (what if scenario analysis based on regional, industry, global macro change metrics and micro-business specific metrics) are important.

Operational & Enterprise Risk themes covered vendors and 3rd party risk, cyber-crime, privacy regulations, reputational risk. Operational risk is often confused with enterprise risk as stated earlier. Bringing risks together, company culture and change management were overarching topics weaved into specific risk discipline discussions.

Why Strategic Risk Associates (SRA) invested in the Risk Americas Conference.

First, the value of knowledge and the minimization of ignorance. Making the investment of time and money, we learn from our colleagues and companies that share our quest for current information and skill improvements. These make all our jobs less stressful and lighter, easing burdens and improving the quality of work. SRA has one of the finest, most experienced risk professional team in the industry who have pioneered a necessary path of business and risk unification. Not opportunistically, we had to do this ourselves in our roles as risk managers, financial industry professionals and regulators. This was SRA’s second appearance and sponsorship of the event.

Strategic Risk Associates Watchtower: Aggregation of silo risk and performance data. All risk categories, attributes, KRI’s, KPI’s quantitative and qualitative for all business lines (in a single system of record/Risk nerve center). Purposefully managing risk comprehensively in unison with strategic, capital planning, day to day activities at every business line. Seamlessly communicating with the executive and board of directors. We created Watchtower out of necessity. Without it, the effort and necessity of risk management is much less effective and at times useless.

Problems and Inefficiencies stem from a lack of a central nervous risk system. Silos, GRC’s, proprietary systems, excel and PowerPoint are parts of the nervous system. Not the central nervous system itself.

Strategic Risk Associates is an industry powerhouse in risk management, founded and led by former bank executives and regulators each with careers and experience spanning more than two decades. The firm provides top of the ecosystem enterprise risk software and highly specialized risk consulting and guidance unifying corporate strategic and capital planning objectives.

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