Developing living policy documents that optimise risk taking

Laurent Robert
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Laurent Robert: Consultant, Spinnaker Consulting Group, USA

Journal of Financial Compliance, 2022, vol. 5, issue 3, 275-283

Abstract: Far too often, organisations consider the development of policy documents an academic exercise rather than integrating them into a robust risk management arsenal. At their fundamental levels, policies establish what an organisation, such as a financial institution, declares as intent for its beliefs and mission as it pursues its daily operations. By changing how they look at risk within their daily business, banks can steer their policy documents away from setting limits, which means minimising risk, and toward seizing opportunities, which means optimising the risk they take for the best benefit. At a more granular level, as they implement policies and bring them to life in their daily practices, banks should use regulatory input to align and influence the individual steps within their processes and procedures, as they work to build wellmanaged and compliant operations. This paper looks at the need for greater policy transparency, particularly as it addresses resulting risk from the global COVID-19 pandemic and recovery, as well as an expanding focus among customers on social justice. Ultimately, the paper recommends critical strategies that banking leaders should take to avoid adding unintended risk as the organisation develops effective enterprise and business policy documents. When done correctly, building a risk-aware culture, supported by sound policies that all employees embrace, can become an advantage for a bank in a market that has never been more competitive.

Keywords: Policies; governance; risk management; compliance (search for similar items in EconPapers)
JEL-codes: E5 G2 K2 (search for similar items in EconPapers)
Date: 2022
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