In the latest episode of the SRA Risk Intel podcast, "Mastering Risk Management: Strategies for Banks in Turbulent Times," host Ed Vincent engages in a thought-provoking conversation with industry expert, Michael Glotz on the challenges faced by banks in effectively managing risk amidst market turbulence and regulatory scrutiny. Below is a summary of their discussion, sharing best practices on providing actionable insights for banks seeking to navigate risk-related activities in an ever-changing landscape.
"The last 90 days has been one of the biggest shock events I've seen since before the last recession and it came on even faster. Almost all the bank management leadership teams, CEO's and boards are looking at their financial institution and saying, well, could this happen to us and what do we need to do to prevent it? - Michael Glotz
Glotz emphasizes the importance of banks taking a step back and conducting a comprehensive assessment of their organizations risk program. By identifying potential risks, such as liquidity runs and capital issues, banks can proactively develop strategies to prevent crises. Glotz advises a fresh look at everything within the bank, from organizational structure to staffing, to ensure robust risk management practices. Glotz goes on to say that "over a trillion dollars in deposits have left the banking system in the last year and would say more than 90% of the banks have been impacted."
The significant outflow of deposits from the banking system is a pressing concern for banks. Glotz suggests a back-to-basics approach, focusing on risk systems, personnel, and infrastructure. Utilizing tools like the Risk Management Association's Risk Maturity Framework enables banks to assess and improve their risk management capabilities.
Having skilled individuals in risk management positions is a common and important theme throughout this podcast episode. Glotz emphasizes the importance of mentorship and development of Chief Risk Officers to enhance risk management effectiveness. Continuous monitoring of risks is crucial too, and Glotz advises leveraging data analysis for more frequent assessments rather than relying solely on quarterly reporting.
To make risk management relevant, Glotz stresses the need to connect it with the bank's strategic planning process. Continuous monitoring of key risks and evaluating staffing adequacy are essential components. Banks can draw inspiration from leading risk management models within the industry.
Vincent and Glotz's insightful discussion offers valuable guidance for banks navigating risk management in turbulent times. By conducting thorough risk assessments, addressing deposit outflows, enhancing risk systems and personnel, and aligning risk management with strategic goals, banks can strengthen their resilience and adaptability in the face of market volatility and regulatory challenges. Embracing continuous monitoring and leveraging data analysis tools or platforms will empower banks to stay ahead of risks and make informed decisions. Mastering risk management is a key driver for long-term success in our current unpredictable industry.
Listen or watch the full recording below.