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Posted by / 04-Nov-2017 02:56

Over the next 12 months, there will be a continued focus on credit quality and loan growth without commensurate growth in deposits which will drive increased industry and examiner focus on liquidity and funds management.In addition, emphasis on operational risks including cyber security, fraud, data management, vendor and third-party risk will continue to grow.One of the best ways we’ve seen a bank address this challenge is to establish a two-way collaborative between the quantitative experts and the internal business executives whereby the quants provided basic education on statistical modeling and telling executives what to look for and the executives in turn provided business expertise.Alternatively, DCG has assisted with the basic statistical education when internal quantitative resources weren’t available.Understanding an institution’s vulnerabilities and the potential impact they may have on capital should not be just a regulatory thing – its prudent business management.In the event that Dodd-Frank Act reforms materialize, forward-looking capital risk assessments for institutions of all sizes will still be practiced, use of models will not diminish, and the need to apply sound model development, management and validation practices will not end.

Additionally, I serve as an educational resource on technical and strategic financial and operational risk management for several industry groups along with examiner training programs.Operational risk models are unique as they are designed to assess the risk of flawed processes, IT systems, manual operations or external events.Such risks have been present in operations since ancient times, but only recently have been included in the risk measurement techniques loop.Common impediments include lack of education and training, lack of sufficient structure, lack of authority and stature for the MRM function, and lack of commitment from higher levels of management.Given heightened concerns over bank financial and operational performance and stability during this changing economic tide, I do not anticipate too much changing near term with regard to the roles audit and stress testing professionals play.

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