May 22, 2014 - The Bank Director's 2014 Risk Practices Survey reveals some very interesting information about the risk management programs that bank boards have in place.

It's classically challenging for many banks to assess how risk management practices affect the institution. However, banks that have worked at measuring the impact of a risk management program report favorable outcomes on financial performance.

Survey Findings

• 97 percent of the respondents reported the bank has a chief risk officer in place or equivalent.
• 63 percent said that a separate risk committee on the board oversaw risks.
• 64 percent of banks that have the separate risk committee reported that the bank's strategic plan plus risk mitigation strategies got reviewed; the other 36 percent weren't doing this.
• 30 percent of the respondents believed that the bank's risk appetite statement encompasses all potential risks.
• Of this 30 percent, less than half actually use it to supply limits to the board and management.
• The survey found that the risk appetite statement, risk dashboard and the enterprise risk assessment tools aren't getting fully used.
• And only 30 percent analyze their bank's risk appetite statement's impact on financial execution.
• 17 percent go over the bank's risk profile monthly at the board and executive level, and about 50 percent review such only quarterly; 23 percent twice or once per year.
• 57 percent of directors believe the board can benefit from more training in the area of new regulations' impact and possible risk to the bank.
• 53 percent want more understanding of newer risks like cyber security issues.
• Senior execs want the board to have more training in overseeing the risk appetite and related issues.
• 55 percent believe that the pace and volume of regulatory change are the biggest factors in leading to risk evaluation failures.
• Maintenance of data infrastructure and technology to support risk decision making is a leading risk management challenge, say over 50 percent of responding bank officers, and 40 percent of survey participants overall.