Operational risk has become a key focus area for many industry leaders
over the past few years, and while it is a simple concept, it can be a
challenge to identify, measure and control. Failure to appropriately control
for operational risks can lead to customer harm, regulatory violations,
and internal compliance failures.
It is critical to have sufficient controls in place to proactively manage
these risks. Origination departments have historically relied on legal
and/or compliance departments as their primary sources of operational
and regulatory control, while focusing primarily on controlling credit
risk within the business line. However, a new view of risk must be adopted
in the current regulatory environment – “Risk is Risk and
Control is Control.” In other words, risk should no longer be distinctly
segmented by “type” or “expertise” at the business
level. Regulators will not segment control expectations by risk type,
so it is the responsibility of the business line to monitor all types of risks.
Due to the nature of human intervention, no area within originations is
more susceptible to the risk of discriminatory lending or customer harm
than manual underwriting. To mitigate such risks, robust Compliance Management
Systems must be implemented within the business line itself.
This white paper will outline a control framework, provide recommended
processes and identify immediate next steps for manual underwriting groups
to mitigate customer harm and regulatory compliance risks effectively
throughout all stages of the manual review process. Some examples of the
processes that will be explored include:
- Creating regulatory and policy requirement awareness in preparation for
a manual review;
- Establishing a preventative and detective control environment throughout
information gathering and decisioning processes;
- Monitoring key metrics to validate adherence throughout the end-to-end
manual process; and
- Developing a culture of accountability and ownership for corrective action processes
Download the white paper to learn more about controlling risk in manual underwriting.