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Risk Management for Bank Directors

Uncertainty coming from the euro zone is just one risk banks must plan for.

Bank directors will need to be aware of several developments and potential sources of risk in the coming year, Steve Turner writes for Novanta. Corporate finance leaders and boards will have to be more involved in

Bank directors will need to be aware of several developments and potential sources of risk in the coming year, Steve Turner writes for Novanta. Corporate finance leaders and boards will have to be more involved in risk management discussions, he says, and will need to focus on the past real estate collapse, upcoming capital requirements and bank regulations as they shape new strategies for insulating themselves against outside forces.

"Banks will need to retool their risk measurement and management capabilities to look forward and align with their regulators," Turner advises. "Both bankers and regulators will be talking a new language of potential risks and actions to mitigate losses and exposures before they occur."

Part of doing this will require boards to perform a balancing act between maintaining their liquidity levels, keeping losses as low as possible and protecting capital. After the board has agreed on a risk policy, it will need to set the risk limits, organizing them by class, business line and type, he says.

With increased regulations, uncertain markets and a spectre of collapse hovering over the euro zone, banks will need to reassess their standings and seek out solutions to any risks threatening their stability.