You can’t be a quality banker unless you have your head straight about risk. For that matter, if you don’t have a clear view and clean language about risk, you really can’t manage risk accurately. Solid risk management starts with having a common and accurate language about risk and the risk you are willing to take. For example, “risk tolerance,” “risk appetite,” “risk target,” “risk capacity” and “risk limit” are often used interchangeably, but they mean different things.
Tag: Chief Risk Officer
Next to strategy, risk management remains an overlooked discipline in community banking. Dodd-Frank and related 2012 Enhanced Prudential Standards requires a Chief Risk Officer (“CRO”) or similar position to manage an executive level risk committee and report directly to either the CEO or the Board for banks over $50 billion in total assets. However, we are big fans of starting this process much earlier, around $400 million in total asset size, even if it is just a part-time position.