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Training as a Risk Management Solution
BY JERRY MILLER
As regulatory scrutiny mounts, training should be viewed as a risk management tool.
While seldom a singular solution to increased regulatory risk, focused training represents an important management tool.
Risk supervision remains a primary focus during regulatory examinations. As a subset of risk management supervision, regulators are asking more pointed questions about supporting risk-based training programs while more financial institution directors are seeking guidance on how to focus training curriculum on high-risk areas. Meanwhile, senior management is challenged to address these topics while reducing costs at the same time.
While no single approach will fit all institutions seeking to implement and maintain risk-based training programs, there are key elements that will apply to most. These include:
1. A self-assessment to identify major components that impact risk-based training. The assessment should include:
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Level of detail and support provided by internal policies and procedures, including detail on automated and/or manual controls;
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Advertising and marketing programs, including types of media utilized;
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Quality of information systems, including program accuracy, data capture and automated controls;
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Adequacy of staffing in key positions for daily supervision;
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Experience level of staff and recognition of staffing turnover.
2. Analysis of lending and deposit products and related services offered to determine the specific regulatory requirements for each product. Other focus areas, such as marketing materials, should be considered on a stand-alone basis.
3. By product/service or specific regulation for the institution, consideration of findings of internal reviews by compliance staff and/or internal audit. Also consider external review comments by external independent audits and examiners. Risk weight these findings.
4. Objective evaluation of prior training initiatives. Consider such criteria as training frequency, level of coverage and adequacy of training support detail.
Using this framework, it is possible to create an institution-specific regulatory risk training profile. This institution-specific profile can be assessed on a product or service level. Based on detailed job descriptions, you can project levels of regulatory risk by staff position. With a little more fine-tuning, it's possible to narrow the regulatory risk ranking by office or department. Utilizing this analysis, training may be stratified by regulation risk, by product or service, by staff position and by location. The more monitoring information available, the more focused the training. Instead of a general training approach, training now has become job-specific.
While seldom a singular solution, focused, regulatory risk-based training represents an important management tool. Focused training on significant risk by products, offices or job positions makes sense. Utilizing a risk-based approach may also reduce training costs, expand staff knowledge of regulation for specific positions, encourage individuals to learn and provide senior management with another tool to assess staff performance.
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