Avoid a change if your bank lacks the ability or resources to implement it successfully. Instead, consider accepting low growth, managing the institution for cash and returning the excess capital to shareholders.
Successful banks are, among other things, focusing on education and employee training courses, establishing a formal enterprise risk management department and tying compensation to clearly defined best practices.
Developing and implementing programs that accurately detect consumer vulnerabilities in the marketplace is important to better manage risk at financial institutions and for public policy purposes.
Special credits, like accounts receivable financing lines, real estate construction loans or import-export lines, require experienced personnel because, while they may be quite profitable, they are inherently hazardous.
Loans with little or no down payment were the root cause of the recent financial crisis. The failure to save for health care and retirement is the root cause of the next financial crisis.
Banks are assuming greater risk on the strategic side, by entering unfamiliar product territory, and on the cost side, by devoting fewer resources for risk management.
Banks today are struggling to pull together complaints data from multiple sources for analysis, resolution and reporting. There is also the challenge of interacting with customers, especially when something goes wrong.
The risk profession continues to aid and abet our tendency to want to quantify everything. But understanding real life is ultimately a social, not physical, science.
