Answer:
Risk Dashboards are created to provided timely notification to management of the direction of risk in business lines. When deciding what to include in your initial risk dashboard, consider:
- Aggregate risk scores in individual categories:
- Inherent Risk
- Risk Trends
- Effectiveness of Mitigating Controls
- Warning signs of change and potential problems….not the answer....just the warning (delinquency trends, fraud trends, slowdown in new accounts)
- Board and Management reports should be linked to Risk guidelines in policies
- Key indicators of performance, or potential problems and trends, should be monitored, for example, Credit Risk:
- Reports of new business, compared to Loan Policy
- Loans made as exceptions to Loan Policy (appraisal, limits, etc.)
- Concentrations of credit tied to policy
- Credit quality (e.g., delinquencies, classifieds, watch list) tied to policy
- Credit grades by loan review compared to officer grades (percentages/trends)
- Percentage of loan reviews completed
- Levels of documentation loan exceptions
- Consider quantitative and qualitative measures
First published on BankersOnline.com 11/17/08
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