Frederic Bertholon-Lampiris, director at Deloitte Singapore’s Financial Services Industry practice, feels that a robust risk appetite framework and an integrated stress testing programme are essential risk management components.
June 04, 2013 | Frederic Bertholon-LampirisAs Singapore’s financial and economic recovery continues slowly, the spotlight is on risk governance of domestic banking institutions, forcing them to reassess and improve their current framework and practices; not only to reach compliance with reinforced guidelines, but more importantly, to demonstrate that risk management is an integral part of their top decision-making process.
The role of the board
A bank’s board can no longer be a remote oversight body but should have a broadened and deepened role and be directly involved in the design and setup of the risk management framework. Monetary Authority of Singapore’s expectations of the board have evolved from “ensuring a culture of sound risk management”, to “establish and communicate corporate culture and values” and “establish conflicts of interest policies”. There are also new responsibilities in terms of establishing fit and proper standards, overseeing the design and operation of remuneration policies and ensuring adequate record keeping systems for the purpose of preparing financial statements.
There is also particular emphasis put on the composition, experience, training and performance of board members. Their constitution should be based on transdisciplinarity in order to ensure an optimal alchemy of expertise and skills when it comes to decision-making. This would encourage boards to review their composition. An increasing number of institutions are appointing former Chief Risk Officers (CROs) as members of their boards, in order to instil more risk management expertise into their governance and decision-making process. Board needs to step up its training and development program covering the risk profile of the institution and periodic regulatory updates. This is consistent with the best practices observed in the industry in recent years.
When it comes to performance, regular review is required and the quality of risk management and adequacy...
Categories:
Operational Risk, Regulation, Risk and RegulationKeywords:Frederic Bertholon-Lampiris, Deloitte Singapore, MAS, BCBS, Credit Risk
