10 Aspects of a Good Risk Appetite Implementation Process

Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
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10 ASPECTS OF A GOOD
RISK APPETITE IMPLEMENTATION
PROCESS
An Excerpt from the Credit Risk Management Audio
Conference Series
Speaker: Lynn Koncz, SVP/Enterprise Risk Management, PNC
Bank

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BENEFITS OF A ROBUST AND
EVOLVING RISK APPETITE FRAMEWORK
A robust and
evolving risk
appetite
framework:
• Leverages existing practices.
• Represents the aggregate view of
risk across all lines of business and
risk categories.
• Creates a dynamic structure that
allows for internal and external
changes in risk.

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You should incorporate
the following 10 factors into your
risk appetite
implementation/reassessment
process.
K

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BALANCE RISK AND REWARD
Reward
1
Risk

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Make sure all employees understand:
The bank’s
overall risk
philosophy.
The bank’s
risk appetite.
And how it
applies to
their
respective
roles.
ENSURE UNDERSTANDING
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ESTABLISH RISK
PROCESSES
Identify risk.
Assess risk.
Categorize
risk.

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Collaborate with
key teams to identify and
mitigate risks.
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COLLABORATE

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5 Each team
should:
Be tasked with risk
management activities.
Have clear and
well-understood roles and
responsibilities.

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COMMUNICATE
Across the
enterprise
Up to the board of
directors
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STRIVE FOR
CONTINUOUS IMPROVEMENT
Create a
mindset of
continuous
improvement
by:
• Setting goals.
• Managing to key risk
management objectives.
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Select highly
experienced
individuals with
specialty risk
expertise for core
risk areas.
8 SELECT EXPERIENCED
INDIVIDUALS

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Identification
process
Escalation
process
Review process
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CREATE PROCESSES
FOR EMERGING RISK ISSUES

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Ensure that the risk
management team is directly
involved in strategic planning and
new business initiatives.
10

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ABOUT RMA’S CREDIT RISK MANAGEMENT
AUDIO CONFERENCE SERIES
This popular series of ten audio conferences highlights
the current issues and trends in the credit risk
management arena.
Participants have the opportunity to hear from seasoned
industry experts and engage in lively discussions on the
topics that matter most today.
Learn more.

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SHARE THIS PRESENTATION
Visit http://www.rmahq.org for information on risk management
RMA is a member-driven professional association whose sole purpose is to
advance sound risk principles in the financial services industry.
RMA helps its members use sound risk principles to improve institutional
performance and financial stability, and enhance the risk competency of
individuals through information, education, peer sharing, and networking.
Become a member today.

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Managing Portfolio Limits BLOG POST Posted on November 19, 2015 by rmablog
A bank’s risk tolerance and risk diversification policies should drive portfolio limits. Well established policies and procedures
can help maintain controls over concentrations and help produce the desired mix of the loan portfolio.
In the most recent installment of the Credit Risk Management Audio Conference Series, Lynn Koncz, SVP/Enterprise Risk
Management at PNC Bank, discussed how her bank manages its portfolio limits through its risk appetite framework.
PNC has recently reassessed their existing risk appetite to address the changes—new regulations, multiple bank acquisitions,
an economic downturn, stress testing requirements, Basel, and heightened standards—that have taken place in the economic
environment over the past several years. The more robust and evolving risk appetite framework leverages existing practices,
represents the aggregate view of risk across all lines of business and risk categories, and creates a dynamic structure that
allows for internal and external changes in risk.
Koncz shared lessons learned during the bank’s risk appetite implementation process:
• Balance both risk and reward.
• Ensure all employees understand PNC’s overall risk philosophy and appetite and how it applies to their respective roles.
• Establish processes to identify, assess, and categorize risks.
• Collaborate with key teams to identify and mitigate risks.
• Task each team with risk management activities and ensure that the team has clear and well-understood roles and
responsibilities.
• Communicate across the enterprise and up to the board of directors.
• Create a mindset of continuous improvement by setting goals and managing against key risk management objectives.
• Select highly experienced individuals with specialty risk expertise for core risk areas.
• Create an identification, review, and escalation process for emerging risk issues.
• Ensure that the risk management organization is directly involved in strategic planning and new business initiatives.

10 Aspects of a Good Risk Appetite Implementation Process

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