Challenge
The main challenge for the client was to implement changes to their risk appetite in a gradual way. The goal was to create a smooth transition across different business branches operating in various countries. This approach needed to account for each branch's unique level of operational maturity and their distinct understanding of risk appetite and key risk indicators.
The risk team had quite ambitious goals, but they were operating in an environment where the level of understanding and the level of application of risk appetite wasn't always fully mature.
We couldn't immediately transition from their current situation to best practice. Instead, we needed to find a midpoint that was familiar enough for the business while still satisfying the regulatory requirements.
Understanding the client
For starters, we prioritised a comprehensive understanding of the client's specific requirements and operational landscape. We invested significant time in identifying implementable solutions that aligned with the business's risk maturity and met the regulatory standards, especially those of the bank's headquarters.
Methodology
We worked fully collaboratively with the client, for example through weekly meetings. During these conversations, both our risk experts as well as the client’s risk team were comparing the results and progress on the various workstreams of the mission.
Solutions
We jointly defined risk appetite statements and monitoring indicators, both leading and lagging, for each of the key risks in their operational risk taxonomy. We also produced a draft risk appetite policy, KRI monitoring templates, and training slides on risk appetite.
On top of that, we organised several trainings with the different teams to familiarise them with both the general concepts of risk appetite in KRIs, and with the new approach delivered.
Our risk experts allowed the client to satisfy the regulators in the different countries. Besides this, they gave confidence to the board that the enterprise risk management of the bank was operating to market and regulatory standards.
Our pragmatic approach made it easy to effectively implement these indicators and statements in different country operations and departments. It also enhanced the risk team's monitoring and governance capabilities while simultaneously improving risk culture and understanding across various business lines.
