Risk Management and Risk-Based Supervision

 

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Course Description:

This lesson is an introduction to approaching the identification of risk in a bank.

 

Topics:

  • Risk - a part of banking

Objectives:

  • Identify ways risk affects the banking industry.

Evolution and Nature of Risk in Banking
This lesson provides a historical approach to risks found in today's financial institutions.

Topics:

  • Factors affecting risk
  • Systemic and firm- specific risk
  • Internal and external risk

Objectives:

  • Identify risk.
  • State how risk has evolved in the financial industry
  • Identify ways the following affect risk:
     
    • Technology
     
    Legislation
     
    Changes in the marketplace
     
    Changes in competition
     
    Demographics
     
  • Identify systemic and firm-specific risk
  • Identify internal and external risk

Risk Management
This lesson covers the elements of effective risk management and the different perspectives of bankers and regulators.

Topics:

  • The Risk Management Process
  • Elements of Risk Management
  • The Banker and Regulator Perspective

Objectives

  • Describe the four steps of the risk management process.
  • Describe the four elements of effective risk management.
  • State the differences between the banker and regulator's perspective of risk management.

Regulatory Designations of Risk
This lesson covers the common risk designations and categories.

Topics:

  • Common Risk Designations
  • Risk Categories

Objectives:

  • Define common risk designations.
  • Given a risk category, identify the type of internal and external factors that might affect that risk category
  • State whether factors affecting a risk category could increase the risk for that category.

Emerging Technology Risk
This lesson focuses on the risk that is inherent within the information technologies found in banks.

Topics:

  • Technology dependence
  • Information Technology Risk Elements
  • Integrating IT Risks with Safety/Soundness

Objectives

  • Explain the increasing and critical dependence financial institutions place upon technology and the risk associated with this dependence
  • Define information technology risks.
  • Explain information technology risk elements and how they affect safety and soundness risk categories.

Risk-based Supervision
This lesson covers the risk-focused examination process, off-site supervision, and the different categories of risk measurement.

Topics:

  • Introduction
  • Critical Thinking
  • What is Risk-based Supervision?
  • Ongoing Off-site Supervision
  • Risk Profiles and Risk Assessments
  • Risk Measurement Categories
  • Mitigating Factors
  • The Examination Process
  • Examinations

Objectives

  • Define and discuss the process of critical thinking.
  • Describe the processes used in risk-based supervision.
  • State the process for developing the risk profile and risk assessment.
  • Describe the risk-focused examination process
  • Evaluate risk.

Rating Risk Management
This lesson focuses on rating bank management's risk management capabilities. It covers rating definitions and criteria examiners use to assign a rating.

Topics:

  • Risk Management and the CAMELS Rating
  • Risk Management Rating Definitions
  • Case Study

Objectives

  • Describe the process of rating risk management capabilities of bank management
  • Describe the Federal Reserve's rating definitions and the criteria examiners use in assigning the rating

 

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