NY Fed Vice President Calls For Evolving Risk Management Practices

Federal Reserve Bank of New York Executive Vice President and General Counsel Michael Held shared his concerns about "excessive formalism" and rigid reliance on the standard risk management model. The model sets forth distinct roles and responsibilities for three units within a company's risk governance framework: (i) front-line business units, (ii) independent risk management and (iii) internal audit. Mr. Held warned against "silos" and an overreliance on a rigidly constructed framework at the expense of flexible management of firm-specific risks.

To improve effectiveness, Mr. Held encouraged first line units to:

• seek out a "diversity of viewpoints" when assessing risk management processes, avoiding the tendency to defer to existing and accepted practices;