Risk Controls to Receive More Scrutiny

As more attention is devoted to post-mortem analysis of the economic meltdown and what financial institutions can do to improve their risk management practices, it is becoming clear that regulatory and credit rating scrutiny will become much more intense.  Here is an excerpt from an article in today's London Times that supports this view.

 "there was the failure of external regulators and rating agencies to monitor the banks' risk-controls. Despite deficiencies in bank management, some of the problems could have been averted with stronger checks and balances from the regulatory bodies charged to assess risk. But rating agencies undervalued risk when assessing new products. And regulators ignored the dangers of macroeconomic contagion, as well as failing to apply any independent checks to the risk models used by banks."

How is your company preparing for the increased scrutiny?  Wheelhouse Advisors can help with cost-effective strategies to manage your risks and meet stricter regulatory requirements.  View the brief video below or visit www.WheelhouseAdvisors.com to learn more.

[googlevideo=http://video.google.com/videoplay?docid=6188056548864645559]

ERM Case in Point

This week's rescue of Citigroup serves as a prime example of how fragmented approaches to risk management can have disastrous consequences.  The New York Times presented a thorough review of the actions and inactions occurring within the ranks at Citigroup that ultimately led to far excessive risk-taking.  In short, the risk oversight was relegated to those in the business units who had the most to gain by taking excessive risks.  This, in turn, led to the creation of a culture that considered risk management as an after-thought and did not promote a full understanding of risks across the enterprise.  Lynn Turner, formerly the chief accountant at the Securities & Exchange Commission, offered his view of Citigroup in the article.

“If you’re an entity of this size,” he said, “if you don’t have controls, if you don’t have the right culture and you don’t have people accountable for the risks that they are taking, you’re Citigroup.”

Financial and non-financial corporations alike should use the case of Citigroup as an example of how not to structure their risk management programs.  To be truly effective, enterprise risk management programs should be supported by a strong culture, strong controls and strong competencies in risk management disciplines. Visit www.WheelhouseAdvisors.com to learn more about building an effective enterprise risk management program.