News & Insights
SEPTEMBER 22 – 23. 2020
SMARTER Risk Management is delighted to announce its participation in the sponsoring of the ABRIGO “THINK BIG. MANAGE RISK. DRIVE GROWTH. “ 2020 Virtual Conference.
Visit www.abrigo.com/thinkbig-manage-risk-drive-growth-virtual-event for all the details.
Model Validation Changes Under CECL - Moving from Incurred Loss to Expected Loss
ALLL/CECL & COVID-19 - Reserving for Loan Losses During a Pandemic
Until recently determining the reserve has been a fairly straightforward and predictable event. Now as the financial industry enters into a “virus driven” recession. The time has come for Bankers to ask themselves two critical questions. “How do I reserve for this, given all the uncertainty that exists, and the (as of right now) lack of actual losses? And how do I support the reserve decisions I make?”
This article discusses ways to address the reserve over the next few quarters. By reviewing the current situation, what is unpredictable and predictable about it.
Latest From The Get SMARTER Blog
A few weeks ago, I was listening to a Webcast by Jos Gheerardyn, the CEO of Yields.io entitled Model Risk Management during Periods of Stress. Jos has created a company that provides firms with the ability to perform model validation using an A.I. based platform, a very unique and innovative approach. Jos and I are focused on model risk management but from different, yet complementary, vantages. As such, I am always interested to what Yields.io is doing because what they are doing is where the rest of us will be heading.
“I am quite positive that, in reality, everything is going downhill fast” This sentence popped into my head the other day and it got me thinking. We are pulled in many different directions; sometimes positive, sometimes negative and sometimes it just is what it is....
Q3 2020 is ending this week. Everyone will be busy closing out the books on the quarter and, in particular, determining the credit loss exposure of the Bank. And with no further relief passed by Congress, the rest of the year will continue to be an uncertain challenge.
We are bombarded with statistics every day. If you turn on the news (not always recommended) you will hear about the unemployment rate, the stock market, COVID-19, the election, etc… And at work, we have statistics coming at us from all sides.
In reality risk and risk management are soft subjects resulting in approximations, guesstimations, probabilities and other “uncertainties”. These uncertainties result in people having to make decisions about how to act.
Why don’t we (collectively) learn from the past? Why do we dismantle programs and safeguards as we move further away from the risk event? Why do we make statements like, “I’ve never experienced this before”, or “This has never happened” when there is proof of a risk that materialized into a flood or pandemic or recession, often within the past 100 years.
Bankers are now entering the phase of the pandemic where things will start to intensify. Until now the deferments and the delays in recognizing troubled and defaulted credits (as mandated by the CARES Act) have allowed us to focus on the customer. The social safety net (as enacted by Congress) has allowed many, but not all, people to keep up with their expenses. The myriad of actions taken by the government in March have pushed out the day of reckoning (financially, at least) into the late fall or early next year.
A Tabletop exercise can sharpen and speed group analysis while the organization is under pressure and can elevate preparedness—provided you properly design, carefully conduct, fully evaluate, and actually use the results of your test.
In order to be an effective and successful risk manager, it is important to understand the set of personality traits that manifest themselves during a pandemic (and other risk events/crises)