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PCBB Banc Investment Daily August 28, 2019
Banc Investment Daily
August 28, 2019

ERM Program Considerations

Summary: While ERM is not required for most community banks, more are choosing to implement such programs as a means to reduce risk and increase profits.
Working can be hazardous to your health at times. Research by the Bureau of Labor Statistics (BLS) ranks such things and finds fatal work injuries most often results from transportation incidents (41%); followed by falls, slips and trips (17%); violence and other injuries by persons or animals (16%) and contact with objects or equipment (14%). Risks are everywhere so be careful out there.
Speaking of risks, today we look at enterprise risk management (ERM). Yes, we know ERM is not required for most community banks, but more are choosing to implement such programs as a means to reduce risk and increase profits.
At a time when community banks are under so much pressure, it could seem odd that many are looking to embrace ERM programs. After all, regulators don't require community banks to have formal ERM programs.
That said, community banks are recognizing that successful risk-management initiatives can boost profitability, mitigate third-party and other risks and aid in meeting strategic goals. You heard us right - ERM may seem incidental, but it is increasingly becoming more appealing, as risk management and potential security compromise become bigger issues. Here are some tips for bankers who may go down this path.
Regulators are becoming more interested in ERM. While community banks are not required to have an ERM program in place, regulators are becoming ever-more aware of how *all* US banks manage internal and external risk. It's not unusual to include enterprise risk as a discussion point in regular meetings with the board, or senior management these days. Even individual department heads are becoming involved in ERM development.
Balancing customer experience and risk. In some cases, providing for a more secure experience may take away from how you connect with your customer. Hence, in developing an effective ERM program, many bankers are (understandably) concerned that they will also be undercutting their ability to connect with customers and prospects. Keep this in mind if you are setting up an ERM as you test and learn.
Competing with bigger banks. Community banks will never have the resources of the largest counterparts, so you have to do things faster and simpler when possible. Here, a well done ERM program can move from a large bank "best practice" to a way for community banks to differentiate themselves, boost profits, control risks and avoid high costs and duplicative efforts.