RP Financial provides effective enterprise risk assessment consulting services to assist our clients in evaluating the degree to which they have properly identified, understood, measured, monitored and controlled enterprise risk as part of a deliberate risk/reward strategy and to help them implement strategies to mitigate risk, enhance performance, ensure effective reporting and compliance with laws and regulations and avoid potential future damage to their reputation and associated consequences and to mitigate residual risk and unanticipated losses.
We have considerable experience working with executive management and Boards in organizational matters in connection with strategic planning, merger and capital transactions and regulatory enforcement actions. In addition, our consulting staff includes former members of executive management, Boards, de novo bank organizers/principals and regulators of banking companies. These individuals have assessed, developed and implemented corporate wide and line of business restructuring and reengineering plans to mitigate risk identified through examination and due diligence processes, including for public holding companies with non bank subsidiaries; developed and executed strategic business and CRA plans; formulated policies and procedures; engaged in asset/liability, investment and balance sheet management; negotiated, executed and integrated bank mergers; and formulated and implemented capital strategies.
Methodology
In performing its enterprise risk management (“ERM”) assessment, RP Financial integrates the guidance from the federal and other banking regulators as well as other authoritative sources. In our enterprise risk assessment we consider the following risk categories, consistent with the risk areas that are commonly identified with the operations of a banking enterprise: |
The sources of risk RP Financial evaluates include external factors, internal factors and risk relating to change. In evaluating these risk factors, RP Financial evaluates sources of risk, such as corporate structure and governance; staff reporting lines, succession and turnover; product complexity; rapid growth of banking companies or certain product lines; economic, demographic and competitive factors; customer profile; and, technological factors. We evaluate risks relating to change, which may or may not involve risks that are under the client’s control, such as interest rate, market, economic or competitive change, as well as regulatory, legislative or tax change. Risk factors may be attributable to a changed operating environment, new personnel, new or redesigned information systems, new or revised processes, rapid growth or shrinkage resulting from unexpected loss of business, new technology, new product lines and activities, acquisitions, corporate restructuring and/or other factors. In performing its risk assessment services, RP Financial looks at: the components of risk; the quantity of risk; quality of risk management, aggregate risk; and the direction of the individual risk components and the overall risk.
Phased Approach
Depending on the needs of the client and its existing ERM infrastructure development status and requirements , engagements consist of at least one phase, but potentially up to three separate phases.
1st Phase. In the first phase, RP Financial identifies the primary areas of risk; how management is managing and mitigating those risks; how significant the residual risk is; and whether management and the board clearly understand and are properly managing the residual risk. We prepare a report identifying the key areas of risk, the nature of the risk, the likelihood of a risk related event, an assessment of the internal and external factors, an evaluation of the strengths and weaknesses in the existing ERM program and processes, a critique of the current risk response system, the dissemination of risk awareness information and risk management process throughout the organization, the potential financial impact as well as the potential impact on organization and operations, and significant deficiencies in the risk management processes as well as monitoring and reporting key risks. The report will be tailored to address at a minimum the key risk areas identified by bank regulatory agencies. In addition, the report will incorporate detailed peer group analyses, market area assessments, and competitive analyses. For those clients who have not yet implemented a comprehensive ERM process, we offer an optional educational component in the first phase, to educate the board or a committee thereof regarding the ERM process and help them establish a reporting and governance system.
2nd Phase. In the second phase, we formulate the corrective action plan for all or selected recommendations in the report based on our clients wishes. The report makes recommendations in the appropriate areas with elevated risk above the client’s tolerance, particularly with respect to those areas with the greatest adverse impact to their financial, operational, organizational and reputational profile. The report includes corrective action steps to be taken and includes areas for suggested remediation, steps to mitigate the risk profile to acceptable levels, potential staffing enhancements or training, revisions to policies and procedures, amendments to the strategic plan and strategic objectives. The plan is aimed at improving our client’s ERM program and processes.
3rd Phase. In the third phase, RP Financial implements the corrective action plan in an advisory or project management role.
Philosophy
Our enterprise risk assessment services are designed to allow our clients to prospectively realign their risk appetite and strategy if appropriate, enhance risk response decisions, reduce operational surprises and losses, identify and manage multiple and cross-enterprise risks, proactively seize opportunities and improve the deployment of capital. These enterprise risk assessment services are designed to feed into our client’s overall ERM program that are applied at every level of the organization, considered in setting strategy, and applied through the consolidated organization. |
