Reserve Bank of NZ releases Risk Management Programme Guidelines

Risk Management Programme Guidelines

The Reserve Bank released it's Risk Management Programme Guidelines for Non Bank Deposit Takers in NZ.

Deposit taking finance companies, building societies and credit unions are required to have a risk management programme from 1 September 2009. The programme needs to show how they will identify and manage credit risk, liquidity risk, market risk and operational risks, appropriate to each institution’s particular circumstances.

"The development of these regulations is another positive step forward in implementing the new prudential regime for non-banks which is aimed at improving the future resilience of New Zealand’s non-bank financial sector” said Reserve Bank Deputy Governor Grant Spencer.

Mr Spencer said risk management programmes will also need to show how an institution plans to address stress events that could disrupt their business, and identify the responsibilities of governing bodies and senior management.

Managing Operational Risk

One specific area of the Guidelines refer to is the management of Operational Risk.

An area of Operational Risk they highlight is risk that can arise from the deficiencies in information systems. Now, if you are using finPOWER as your Deposit Management system you can be safe in the knowledge that you have an industry standard system and the foundations of a sound risk mitigation tool. However, finPOWER should only be the foundation. There are a few other factors that you need to consider:

• Is finPOWER configured optimally for my situation?
• Are there any additional benefits or improvements I can be attaining from finPOWER?
• Are the back up procedures I have in place (lets assume you have them!) working and are tested regularly? Is everything being backed up i.e. data files, document templates etc
• Are the other systems that surround finPOWER such as my accounting system etc seen as an industry standard?
• Are my policies and procedures for the use of finPOWER fully documented and enforced?

If the above need attention, please contact your Dealer.