Central Banks

Executive Overview of our Risk Culture Maturity Monitor and the benefits of using this tool in Central Banks for Supervision of Risk Management in financial institutions in the country

Background

We bring experience to bear on your issues; in a practical, ‘light touch’ manner that delivers results. We help you to define the goals and support you to achieve them internally, ensuring a robust and long-living working solution.

Risk Culture Monitor is an effective software tool that accurately measures the level of maturity of the implementation process of embedding an effective Enterprise Risk Management Culture in any organisation.

This tool was developed as a result of more than 10 years of intensive research on the subject of Risk Mitigation and how to address the people risk component of Enterprise Risk Management. Most organisations build impressive risk management systems, but fail to address the fundamental issue of Risk Culture.

The Risk Culture Maturity Monitor

The Risk Culture Maturity Monitor provides information on the level of maturity of the implementation of Enterprise Risk Management in six key categories within business operations:

Key categories are:

  1. Policies
  2. Processes
  3. People and Organisational Design
  4. Reporting
  5. Management and Control
  6. Systems and Data

The system is delivered through our unique Genius Methods IT platform therefore no infrastructure investment is required by Central Banks. Users are only required to have access to the Internet and each will be supplied with a unique user ID and Password to complete their assessment online.

The first step is a once-off assessment to evaluate risk maturity levels at a given point in time. This evaluation will objectively identify specific gaps and support requirements to form an action plan based on concrete evidence, not perception.

The underlying mathematical model is not visible to users and all questions are structured in such a way that it is impossible for any user to manipulate or predict the outcome.

If the Central bank takes a longer term view and carry out bi-annual or annual assessments for each institution you will get the most value as you are then able to effectively track progress (and regress) of each institutions implementation process.

Outcomes based reporting: The reporting from the system will provide an accurate picture of the level of implementation maturity in each of the 6 categories. There are 5 levels of risk maturity defined in the system. These are:

Urgent review required, no progress and possibly no strategy Level 1
Some progress made to establish an ERM Culture, focus and drive ERM Strategy Level 2
Below ERM Culture  Maturity Average, review implementation process Level 3
Reasonable Level of ERM Culture established, review outcomes and reporting Level 4
Mature ERM Culture, focus on continuous improvement and value add Level 5

The value of this report not only lies in having an accurate assessment of each maturity level (above), but organisations will also be able to identify the key areas to address and focus on in the process to achieve the top level of maturity in each of the 6 categories (see earlier) .

How can this system be used by Central Banks to effectively track the levels of maturity of an ERM Culture in all banks and financial institutions in the country?

There are three different commercial options that will all add value to the activities carried out by Central Banks in the process of effective supervision of Risk Management Implementation and Guidance provided to Financial Institutions.

In each case:

a. The list of institutions must be approved by the Central Bank and submitted to Genius Methods by the Central Bank.

b. Outcomes based reporting will be available only to the Central Bank as

i. a consolidated report, and
ii. an individual report per institution

c. Feedback reports will be based on data submitted directly by the institution which will be without any intervention or subjectivity added by any third party

d. Central Bank Supervisory staff can use these reports to evaluate and discuss action plans and regulatory requirements with the individual institutions.

Option 1

All banks / financial institutions carry out a once-off assessment at institutional level.

  • Genius Methods will provide ONE User ID and Password for each institution to complete the assessment online.
  • This option will give Central Banks an accurate picture of the level of maturity of ERM in each institution at that specific point in time.

Option 2

All banks / financial institutions carry out a once-off assessment for each division / department.

  • For this option Genius Methods will provide ONE user ID and password for each listed department of each institution to complete the assessment online.
  • This option will give Central Banks an accurate picture of the level of maturity of ERM in the different departments in each institution.
  • The Central Bank will thus be able to identify the level of maturity in EACH department within each institution and this information can be used to focus Risk Supervision efforts and risk management guidance provided by the Central Bank.
  • This option will further enable the Central Bank to evaluate all banks / financial institutions against a set benchmark to be determined by the Central Bank.
  • It will further enable the Central Bank to Benchmark the maturity level for the whole financial services industry in each of the 6 categories.

Option 3

To complement either Option 1 or 2 is for Central Banks to take a long term view and use this process to effectively support all Financial institutions in the country with the implementation of an effective ERM Culture by carrying out either of the options described above on a bi-annual or annual basis over a period of 5 to 10 years.

  • This option will give Central Banks an accurate picture of trend over the selected period
  • The trend analysis will provide accurate information to evaluate progress made by all banks and financial institutions
  • The consolidated report will reflect the trend and status of maturity for the entire Financial Services Industry in the country.

Conclusion

The value of this system lies in the fact that all assessments are done online by the institutions and the Central Bank will directly receive the outcomes reporting based on this data.

There can be no arguments or questioning of the reports as they are based on assessments done by the institutions, not by the Central Bank or any other 3rd Party.

This will strengthen the supervisory role of Central Banks through accurate supporting documents for each institution.

Consolidated reporting in any of the options will reflect the status for the whole industry and can be valuable in discussions with international agencies like the IMF and World Bank and enable Central Banks to provide focused guidance to Financial Institutions.

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