RISK MANAGEMENT and CULTURE

Effective risk management systems and a tight culture go hand in hand.

While "risk management" addresses a wide range of topics, at Jeff Judy & Associates we focus on:

• Instilling sound practices to minimize risk from employee action that is inconsistent with the institution's values, standards, and sanctioned practices;
• Providing consulting and analysis tools to ensure that portfolio information is used effectively to manage ALLL and Capital for optimal results;
• Fostering the "tight" culture that allows rapid and effective responses to trends and changes in the bank's risk profile.

The relationship between risk management and culture comes down to ...

Information, Analysis, Response

More than ever before, handling ALLL and Capital wisely can be a life or death issue for your bank.

The recession showed us what under-reserving and inadequate Capital can mean to a bank. Continued scrutiny from regulators is now bringing enormous pressure to bear to force banks to err on the side of caution.

But too conservative an approach to ALLL/Capital -- putting aside more than is needed to protect the bank -- saps resources that could be used to grow the business. There is a "sweet spot" between protecting shareholders' investments and keeping resources available to produce a return on those investments.

You find that "sweet spot" by:

• Gathering the best possible information about your portfolio's risk profile;
• Applying the best available analysis tools to project the future of that risk profile; and
• Providing training, communication support, culture development, and credit policy development to support rapid and effective changes in strategies and practices in response to those projections.

And I can help you with each of those steps.

Risk Ratings, Portfolio Analysis, and Change

Your risk rating systems provide key input to any portfolio analysis model. Yet many risk rating systems have become "information poor" over the years. (For a good introduction to the problem see this e-zine reprint on "The (Unfortunate) Evolution of Risk Rating Systems.")

Jeff Judy & Associates will help you review your risk rating system to identify opportunities to enhance the quality and granularity of the information it provides. We also can guide you to the most sophisticated analysis tools available. And we will help you determine what information you need, and in what format, to get the most informative, and most efficient, results from your analysis.

To benefit from better data and analysis, however, your organization must be able to implement change:

• Enhancing your risk rating practices will require training, credit policy updates, and ongoing communication, and
• Responding to the information about portfolio trends revealed by analysis demands rapid, unified action to gain competitive advantage.

In other words, understanding and tightening your culture may be your first step in improving risk management practices at your bank!

Continue to Assess Your Culture or learn more about Culture and Competitive Advantage ...

Successful risk management depends on cultural factors for quality input and effective responses to analysis. Without a tight culture, your ability to risk manage is limited.