CMS Case Study

Citizens Bank and Trust Risk Assessment Summary 2020-2021

Audit Area

Liquidity

Definition (score range)

Risk Factor

Score

High (21-30)

Moderate (11-20)

Low (0-10)

Rationale

Potential violations of high profile regulations with potential fines, legal liability or costly corrective action are possible. Material financial misstatement is possible due to incorrect handling of infrequent, complex transactions or estimates. Critical management decisions may be based on these financial areas. Complex manual or automated systems are new, critical to management

Significant regulatory requirements are evident; however, regulatory expectations are clear, seasoned, and considered routine. Violations if any will be technical in nature. Material financial effect is possible; however, activity is routine and noncomplex and errors would be readily evident in normal operations. Seasoned and complex manual or automated systems are important to management decision making or product delivery; however, collaborating or alternative back-up systems exist. There is no basis for control assessment, or they are thought to be weak.

Regulatory requirements are limited to low-profile regulations and law issues that warrant action but have significantly lower levels of risk. Impact on accurate timely financial reporting is minimal. Likelihood of material financial reporting effect is negligible.

Current regulatory expectations for liquidity are considered significant. These requirements are known and considered routine as the Bank's liquidity management process is standardized.

Compliance

17

The Bank's liquidity position could have a material impact to the overall institution. However, the Bank has employed liquidity monitoring procedures to help manage the institution's liquidity.

Nature of Transactions

18

Noncomplex systems and operations are seasoned, with well established back up routines.

The Bank's liquidity monitoring uses a combination of manual controls and system monitoring (Darling Consulting Liquidity 360 module). These systems are important to managing the Bank's liquidity position as well as projecting the Bank's liquidity position for future periods.

Nature of Operations

20

decision making, or important to product delivery.

Controls are nonexistent or known to be weak.

Controls are strong or adequate.

Internal controls are in place and function adequately on an overall basis. The most recent FDIC Safety and Soundness Examination (January 2019) rated liquidity as satisfactory but noted a recommendation to improve cash flow analyses and the most recent internal audit of liquidity (2019) resulted in one recommendation.

Internal Controls

12

Minor changes since last audit are anticipated this year.

No changes since last audit are planned this year.

No significant changes occurred in the last 12 months and there are no anticipated changes within the next 12 months.

Major changes since last audit are anticipated this year or not recently reviewed. Management lacks experience or places low priority on internal controls.

Changes to systems, processes, or procedures

8

Members of management have achieved their positions within the Bank because of their level of knowledge, demonstrated skills, and experience within the banking industry. A strong emphasis is placed on maintaining a sound control environment.

Management has average experience.

Management is experienced and has high priority on controls.

Management

10

85

Risk Score

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