Banks must take a stand against a shattered culture or suffer the repercussions of a fractured chain of command, reduced productivity, high employee turnover, weak customer service and poor work quality.
Take care of your management team last, not the other way around. Vet new ideas through risk management and audit committees, not the marketing and sales department. Manage incentive compensation around risk-adjusted performance metrics.
Fraudsters are increasingly preying on the default servicing end of the mortgage lifecycle, where traditional detection methods have not been deployed. Fortunately, there are new ways to spot red flags.
Internal governance policies should define for shareholders, employees and the public how the bank plans to effectively manage the stated risk appetite.
When the OCC took over supervising thrifts, we evaluated the model being used and determined the cost to keep it viable was not justified. Superior interest rate risk models are available from dozens of vendors.
Switching out three VaR models in less than a year raises questions about not only the models' stability but also how risks across large, systemically important institutions can be compared.
It is only natural that a business unit will not want to disturb an established, profitable relationship. But that is how risk enters a business, making the whole firm vulnerable to financial crimes or regulatory violations.
FHFA is admirably trying to design a platform that will work under any future scenario for the mortgage market. But history shows large-scale projects can fall victim to sheer complexity.
Financial institutions can avoid negative headlines by monitoring feedback via social media, continually educating staff on how to talk to customers and making reputation risk a major part of their enterprise risk management program.
