As a risk manager, we are responsible for supporting the business with valuable risk insights to help inform decision-making. The process of risk management should not be done in isolation but as part of the decision-making process. I have listed some practical examples of how risk management can help.

1. Loan Approval

• Decision Context: Approving a loan application.
• Risk Considerations:
  – Creditworthiness of the applicant.
  – Applicant’s income and employment stability.
  – Purpose of the loan and associated risks.
  – Loan-to-value ratio and collateral.
  – Current economic conditions.
• Risk Management: Conduct thorough credit checks, require sufficient collateral, and assess market conditions to mitigate default risk.

2. Investment Strategy

• Decision Context: Formulating an investment strategy for the bank’s portfolio.
• Risk Considerations:
  – Market trends and economic forecasts.
  – Risk tolerance and return expectations.
  – Diversification of assets to spread risk.
  – Regulatory requirements.
  – Liquidity needs.
• Risk Management: Diversify investments, perform due diligence on potential investments, and monitor market conditions to adjust the strategy as needed.

3. Product Development

• Decision Context: Developing a new financial product, such as a high-yield savings account.
• Risk Considerations:
  -Market demand and customer needs.
  -Competitive landscape.
  -Regulatory compliance.
  -Operational capacity to support the new product.
  -Pricing strategy and profitability.
• Risk Management: Conduct market research, ensure regulatory compliance, test the product before full launch, and have contingency plans for operational issues.

4. IT System Upgrades

• Decision Context: Upgrading the bank’s IT systems and infrastructure.
• Risk Considerations:
  -Technological advancements and compatibility with existing systems.
  -Costs and benefits of the upgrade.
  -Potential disruptions during the transition period.
  -Security and data protection enhancements.
  -Long-term scalability and maintenance.
• Risk Management: Conduct thorough testing before full implementation, have a rollback plan in case of issues, ensure robust cybersecurity measures, and train staff on new systems.

Each of these examples involves carefully considering various risk factors and integrating risk management strategies to ensure that decisions are well-informed and aligned with the bank’s objectives and regulatory requirements.

Furthermore, integrating risk management into decision-making not only protects the financial institution but also enhances decision quality and stakeholder trust.

It doesn’t have to be overly complex, as risk managers we need to ensure that we support the business with the tools and insights to help them keep winning!