DBCF Virtual Symposium

10/15/2020

ENTERPRISE RISK MANAGEMENT – KEY TOPICS AND TRENDS

Institutions need to closely monitor second and third inning COVID impacts on credit risk exposures, incorporate potential offsetting impact of next round of government stimulus, and emerging credit concentrations that diverge from historical patterns.

Credit Risk

Industry/Business Context

Evaluate uneven economic impact on credit exposures and potential changes in concentration risk

External Factors

Identify Risks and Opportunities

Make Risk- Informed Decisions

Assessand Quantify Impacts

Monitor and Report

ERM Enablers

Methodologies, Data and Tools

Identify

Quantify

Decide

Monitor

Update credit risk limits / thresholds for new economic reality and pandemic risk

ERM Process Steps Integrated into Strategy Setting and Performance Management

Strategy and Business Execution

Business Planning and Forecasting

Evaluation of Strategic Options

Risk Governance

Risk Appetite

Risk Culture

ERM Pillars

Adjust credit reporting and strategic playbook actions for possible scenarios / incorporate sensitivity analysis / other black swan events

Internal Factors

Expectations, Needs and Constraints

© 2020 Protiviti Inc. An Equal Opportunity Employer M/F/Disability/Veterans. Protiviti is not licensed or registered as a public accounting firm and does not issue opinions on financial statements or offer attestation services. All registered trademarks are the property of their respective owners.

5

5

ENTERPRISE RISK MANAGEMENT – KEY TOPICS AND TRENDS

Compensating processes and controls are needed to manage model risk as models become unreliable in times of severe economic stress and prolonged uncertainty.

Model Risk

Industry/Business Context

External Factors

Identify higher risk models that no longer work, and the compensating adjustments being used

Identify Risks and Opportunities

Make Risk- Informed Decisions

Assessand Quantify Impacts

Monitor and Report

ERM Enablers

Methodologies, Data and Tools

Identify

Quantify

Decide

Monitor

Update process and controls to manage model risk until models can be redeveloped / some level of stability returns

ERM Process Steps Integrated into Strategy Setting and Performance Management

Strategy and Business Execution

Business Planning and Forecasting

Evaluation of Strategic Options

Risk Governance

Risk Appetite

Risk Culture

ERM Pillars

Ensure overall conceptual alignment in modeling approaches for different purposes – reserving, capital planning, business planning, etc.

Internal Factors

Expectations, Needs and Constraints

3

© 2020 Protiviti Inc. An Equal Opportunity Employer M/F/Disability/Veterans. Protiviti is not licensed or registered as a public accounting firm and does not issue opinions on financial statements or offer attestation services. All registered trademarks are the property of their respective owners.

6

6