RM – APR 2023 – L4 – Q6 – Requirements for Effective Risk Mitigation

Discuss five requirements for effective risk mitigation in bank's pursuit of value.

Question

Discuss at least five (5) requirements for effective risk mitigation in the pursuit of value by the board and management of a bank. (20 marks)

Answer

Effective risk mitigation under EWRM and BoG frameworks ensures value creation. Five requirements:
Robust Risk Identification and Assessment (4 marks): Using RCSA; GCB’s post-DDEP assessments identified liquidity gaps, preventing losses.
Clear Policies and Risk Appetite (4 marks): Board-defined thresholds per 2018 Directive; Stanbic’s limits avoided overexposures in 2024 volatility.
Adequate Resources and Training (4 marks): Investing in staff, as Ecobank did for cyber training under 2020 Directive, reducing incidents.
Monitoring and Reporting with KRIs (4 marks): Real-time dashboards; Access Bank’s systems flagged NPL rises early post-cleanup.
Continuous Review and Adaptation (4 marks): Annual stress tests per Basel; Fidelity adapted post-COVID for resilience.