Enhancing Risk Management Policies for Palau’s Financial Institutions
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Palau’s financial institutions are being urged to take a more comprehensive approach to risk management, moving beyond traditional limited-scope risk assessments. According to experts, regularly scheduled risk assessments alone do not provide the necessary insights to effectively identify and manage risks.
The Three Key Elements of Risk Management
To successfully manage risk, financial institutions must focus on three key elements:
- Performing Regularly Scheduled, Comprehensive Risk Assessments: Evaluate various factors such as root cause of the risk, likelihood of a negative event, impact of a negative event, preparedness to respond, and trajectory of risk.
- Taking a Risk-Based Approach: Focus on high-risk areas beyond traditional financial activities and controls, including cybersecurity, reliance on third-party service providers, credit risk, regulatory risk, and fraud.
- Developing and Implementing Programs to Manage and Mitigate Risk: Analyze governance and management, structure and staffing, operational efficiency, safety and security, and processes to improve performance.
Identifying High-Risk Areas
Financial institutions in Palau are advised to take a broader approach to risk-focused practices by addressing top risk areas beyond traditional financial activities and controls. This includes:
- Cybersecurity
- Reliance on third-party service providers
- Credit risk
- Regulatory risk
- Fraud
Implementing Key Benefits
To stay ahead of current and emerging industry risks, Palau’s financial institutions can implement key benefits such as:
- Providing policy, procedure, and process best practices
- Guiding efforts to update policies and procedures
- Supplying training opportunities
- Focusing testing on areas of identified weakness
Next Steps
For more information on this topic or guidance on transforming findings into opportunities for improvement, financial institutions in Palau are encouraged to contact Moss Adams professionals. By adopting a more comprehensive approach to risk management, Palau’s financial institutions can identify actionable opportunities for improvement and stay ahead of current and emerging industry risks.