ERM Overview for Credit Unions
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Enterprise Risk Management (ERM) for credit unions involves a process where the board and management identify risk tolerance, assess risk, and manage organizational risk through various components such as strategic initiatives and compliance. Effective communication and internal controls are essential for successful ERM implementation, with internal auditors playing a monitoring role. The ERM process also includes risk exposure quantification and various responses such as acceptance, avoidance, reduction, and sharing of risks.
ERM Overview for Credit Unions
- 1. Enterprise Risk Management for Credit Unions: An Overview RussellWhite.com © 2010
- 2. What is ERM? ERM is a process where the board of directors and management identify: • Their risk tolerance, risk assessment and risk response. • Events that can impact the organization’s risk (Internal and External.) • How to manage organizational risk. • Strategies to accomplish objectives. RussellWhite.com © 2010
- 3. What are the components of ERM? • Strategic Initiatives • Operations monitoring • Reporting of critical measurements • Compliance with regulations • Perform risk assessments • Communicate risk results • Oversight and periodic review by management RussellWhite.com © 2010
- 4. ERM Encourages a Portfolio View of Risk. RussellWhite.com © 2010
- 5. ERM recommends considering risk when setting all objectives. RussellWhite.com © 2010
- 6. Risks should be assessed in three ways. Likelihood Impact Response RussellWhite.com © 2010
- 7. What Controls are in Place to Contain Risk? RussellWhite.com © 2010
- 8. ERM Communication Management identifies, captures, and communicates pertinent information in a form and timeframe that enables people to carry out their responsibilities. Communication occurs in a broader sense, flowing down, across, and up RussellWhite.com © 2010 the organization.
- 9. ERM Internal Controls A strong system of internal control is essential to effective enterprise risk management. Financial controls and risk management are to be expanded to include all objectives of the organization. RussellWhite.com © 2010
- 10. ERM Internal Auditors • Play an important role in monitoring ERM, but do NOT have primary responsibility for its implementation or maintenance. • Assist management and the board or audit committee in the process by: - Monitoring - Evaluating - Examining - Reporting - Recommending improvements RussellWhite.com © 2010
- 11. Management establishes an ERM by: • Determine a risk philosophy • Survey risk culture • Consider organizational integrity and ethical values • Decide roles and responsibilities
- 12. ERM Risk model example: • Environmental Risks – Capital Availability – Regulatory, Political, and Legal – Financial Markets and Shareholder Relations RussellWhite.com © 2010
- 13. ERM Risk model example: • Process Risks – Operations Risk – Empowerment Risk – Information Processing / Technology Risk – Integrity Risk – Financial Risk RussellWhite.com © 2010
- 14. ERM Risk model example: • Information for Decision Making – Operational Risk – Financial Risk – Strategic Risk RussellWhite.com © 2010
- 15. ERM Risk Responses • Quantification of risk exposure • Options available: - Accept = monitor - Avoid = eliminate (get out of situation) - Reduce = institute controls - Share = partner with someone (e.g. insurance) • Residual risk (unmitigated risk – e.g. shrinkage) RussellWhite.com © 2010
- 16. ERM Management of the Process • Accountability for risks • Ownership • Updates - Changesin business objectives - Changes in systems - Changes in processes RussellWhite.com © 2010
- 17. Check out my videos at BizWizTV.com For more information to help your credit union Contact me: Russell@RussellWhite.com or check out www.RussellWhite.com RussellWhite.com © 2010