Risk Mitigation for Financial Institution

Mitigate the Risk in finance

Risk mitigation planning is the process of developing options and actions to enhance opportunities and reduce threats to project objectives. Risk mitigation progress monitoring includes tracking identified risk, identifying new risks, and evaluating risk process effectiveness

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1. Establish reporting and incident management system

1. Effective report and intake procedures
2. Speak up training for manager & employees
3. Notification protocol
4. Effective investigation protocol, including for investigators
5. Effective remedial measures and appropriate way to track and communicate discipline before it occurs
6. Reporting and communication

1. Internal controls, testing and auditing

1. Anti-corruption

Expense reports, foreign consultant, supplier contracts, due diligence, background checks, recent hires, marketing expenditures, intercompany transfers, accounts payable, compliance certifications

1. LIBOR situations

1. Understand the process
2. clear policy and procedures
3. fiduciary disclosures: 1) trade group involvement 2) industry “best practice” projects 3) multi-employer situations
4. email and communication reviews
5. establish firewalls

1. Make culture a strategic priority

1. Access your culture

1. Cultural surveys
2. Benchmark reporting
3. Exit interviews
4. Conduct a program review
5. Determine stakeholder communication preferences and expectations
6. Identify opportunities to drive program awareness like training, communication and internal marketing

1. Training managers to encourage “Speaking Up” by

1. Welcoming the complaint or report with words and body language
2. Break down hierarchical reporting habits
3. Taking the time to listen
4. Active listening, asking questions
5. Showing the employee they care
6. Understanding of importance of contacting compliance immediately
7. Letting the employee know what is going to happen and that you will follow up with the employee
8. Being professional, respectful and thankful
9. Retaliation will not be tolerated

1. Reporting rates rise when ethical commitment is perceived to be stronger
2. The training value proposition

1. Catch misconduct early
2. Empower potential reporters and give them an alternative to the government
3. Send the employer’s message
4. Help create an ethical culture
5. Establish legal defenses

1. Internal audit

1. The BOD or audit committee and senior management must support and actively oversee the internal audit function
2. The internal audit function must be independent
3. The internal audit function must be risk based and focus on higher risk areas
4. Audit findings and planned responses should be communicated to the BOD or audit committee
5. A tracking system that includes the audit findings, corrective actions taken, and time frames for completion should be incorporated into the reporting function.

1. Cyber security

Failure to provide adequate security can have dire consequences for a financial institution. Risk managers therefore need to maintain a comprehensive understanding of the threats along with their institutions exposure and vulnerabilities. It is a best practice to seek external consultation regarding loss control efforts, risk mitigation.

1. Protecting reputational risk

Reputational risk is the potential that negative publicity regarding and institution’s business practice, whether true or not, will cause a decline in the customer base, costly litigation or revenue reductions. It is impossible to accomplish with 100 percent effectiveness, however, minimizing the potential damage with proper planning, policies and procedures is possible.

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