Two Leading Bankers Speak on the Latest Trends in Risk Management in RMA's Journal of Lending & Credit Risk Management
PHILADELPHIA, March 23, 2000 - Bankers' increasing focus on internal risk management systems has led to a new way of looking at risks institutions face--enterprise-wide risk evaluation and mitigation. It also has led many of them to create a new position: chief risk management officer. This is the view forwarded by two leading bankers in the March edition of The Journal of Lending & Credit Risk Management, a publication of RMA, the international association of lending, credit and risk management professionals.
"It's all about getting the risk management people into the strategic planning side," said Suzanne Lebarge, who was appointed vice chairman and chief risk officer of Royal Bank of Canada about a year ago. Lebarge's appointment elevated risk management to a strategic position at the bank, where it had previously been a support function.
"Each business and its culture has different appetites for risk," she explains. "People also define risk slightly differently." She points out that a risk management system that examines all risk on an enterprise-wide basis will be more effective.
"The integration of risk into the strategic function is a recognition that each organization in the bank can add value to the strategic planning process by managing its portfolio within the existing risk appetites of the individual unit and the institution as a whole," she said, pointing out that Royal Bank of Canada began evaluating enterprise-wide risk about five years ago.
David Eyles, vice chairman of Fleet Financial Corporation, said that his bank began evaluating risk on an enterprise-wide basis in 1996, when the OCC issued its supervision by risk guidelines.
"When you first get into it, you may have a concept of what you want to focus on, but when you peel back the onion on the concept, you find other things you really should be looking at. It's a continuum," he said, adding that he supports the development of an industry definition of operational risk. Lebarge, agreeing with Eyles that this is an evolving process said, "We will always be able to improve on our risk management techniques. New techniques are constantly coming forward to help us see how risks tie together and how differently we can measure them.
"Operational risk is fundamentally changing in ways we had never expected. Technology and centralization of processes are creating new risks to manage," she said.
Both Lebarge and Eyles were key presenters in RMA's fourth annual risk management conference earlier this month in Washington, DC, entitled Capital Management: The Next Challenge.
RMA is the only financial services trade association that specializes in promoting prudent and effective credit risk management practices across the entire banking and lending spectrum for institutions of all sizes. Its membership consists of more than 3,000 financial service providers. These institutions are represented in the association by more than 18,000 commercial loan and credit personnel in 50 states, Puerto Rico, Canada and numerous foreign cities, including Hong Kong, Singapore and London.
For more information, call Pam Martin, Director of Regulatory Relations and Communications, at 215-446-4092 or e-mail mailto:pmartin@rmahq.org