ERM is an organization's enterprise risk competence--the ability to understand, control and articulate the nature and level of risks taken in pursuit of business strategies--coupled with accountability for risks taken and activities engaged in, which contributes to increased confidence shown by stakeholders. (1) In recent history within the financial industry, potential risks have included the losses presented by non-producing mortgages and foreclosed properties.
According to Finley, the years following the collapse of the housing market have upended the economy as a whole, but even more specifically the financial industry--a statement echoed by reports that 2013, four years after the Great Recession reportedly ended, (3) was marked by "unprecedented regulatory scrutiny, the rising importance of reputation, market volatility, greater demands from stakeholders, diverse vendor and third-party ecosystems, and new risks posed by mobility, big data and social media." (4)
For banks of all sizes, per Finley, the challenge of building a strong risk management program remains what some deem to be a daunting task. But during his "Ask the Experts" interview, Finley provides some key takeaways in the area of risk management of which banks should remain cognizant.
"ERM requires a documented look at three quantities, one of which is the controls that are presently in place to mitigate either the severity of potential loss or the likelihood that it will occur," Finley stated. "For each control, an organization must estimate its effectiveness in mitigating the associated risk--the product of those three quantities will produce that company's exposure to each identified risk."
As the industry becomes increasingly regulated, Finley predicts that growing expectations around ERM within the banking sector will necessitate an industry standard that includes continual risk assessment rather than the traditionally annual assessments of the past, which are no longer considered sufficient risk management, per Finley.
"We've seen how important ERM is with regard to making sound business decisions--soon, we'll see industry-wide baseline assessments, where each risk is mapped to a number of indicators that accurately display the true risks to which a company is exposed," said Finley.
NTC, perhaps best known for its expertise in extensive research and document-processing services such as lien release processing, is an advocate for best practices and legislation that standardize the mortgage industry for the betterment of homeowners, land records and the industry at large.
To watch the "Ask the Experts" video, click here.
For more information about
1. "RMA Enterprise Risk Management." N.p., n.d. Web.
2. "OCC Deputy Comptroller Discusses Enterprise Risk Management." N.p.,
4. Santora, Frank, and
Read the full story at http://www.prweb.com/releases/2014/05/prweb11871102.htm
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