Robust risk management is at the heart of a successful financial institution in the best of times. It becomes even more important in times of stress such as the present.
The Board (probably via the Risk Committee) will need to work closely with management in addressing the governance of risk in circumstances that are very different to normal. This will require discipline and structure, clear and regular communication and clarity of roles.
The Board will need to pay close attention to the Risk Management Framework and its various elements (particularly the Risk Appetite Statement) to ensure it is being properly and effectively used to guide management and Board in their considerations.
It is also appropriate that the strength and effectiveness of the Risk Management Framework is assessed closely – in what is effectively a real-life stress test. It is quite likely that deficiencies will emerge. They should be dealt with expeditiously – through temporary and then permanent changes as required.
A disciplined and structured approach is required at management level to deal, in a timely way, with the many changes in risk that have and will occur under COVID-19 conditions. This may involve
Actuaries – in potentially a variety of roles, including CRO) will very likely be involved in providing support to both Board and management on risk management issues. It is important that this support is done in accordance with the established risk governance and management framework, and with a clear understanding of the needs and responsibilities of the recipients of that advice – the Board and senior management.
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- In this Pandemic Resource Centre:
Risk Management implications of Coronavirus (COVID-19) - for Non-Executive Directors
Risk Management implications of Coronavirus (COVID-19) - for Management