S2 | E43: How To Storm Proof Your ERM Program
Lessons Learned from Hurricane Helene and Milton
In this episode of Risk Intel, host Ed Vincent, CEO of SRA Watchtower, is joined by Shawn Ryan, CFO of SRA Watchtower, and Niki White, CGO of SRA Watchtower to discuss the importance of natural disaster preparedness within financial institutions. As climate risks grow and on the heels of two back-to-back hurricanes, financial entities must be proactive to help strengthen their risk management frameworks to protect key assets and ensure operational resilience.
Many people have been significantly impacted by the recent hurricanes Helene and Milton. Please find the below link to donate to the American Red Cross to support those impacted. https://www.redcross.org/donate/donation.html
Risk Identification and Assessment
Banks and Credit Unions are increasingly vulnerable to natural disasters, such as hurricanes and floods. The episode highlighted the critical need to map business assets geographically and identify branches, datacenters, and supply chains located in high-risk zones. Historical data analysis combined with climate models provides actionable insights on the likelihood and potential severity of natural events. This information is crucial for conducting a comprehensive Business Impact Analysis (BIA), helping banks quantify the operational, financial, and reputational consequences of such risks.
The episode also emphasized the importance of developing Natural Disaster-Specific KRIs, which track vulnerabilities like facility readiness, proximity to flood zones, and service disruptions. Implementing automated systems to monitor real-time environmental trends and set up early warnings enhances a bank's response readiness. Monitoring the impact of disasters on supply chains and third-party vendors was also underscored as essential for operational continuity.
Scenario Planning and Stress Testing
Niki and Shawn express the importance of conducting tabletop exercises and stress testing as critical tools for assessing the financial and operational resilience of banks in the face of natural disasters. Regular simulations ensure leadership teams are well-prepared, while stress tests measure the bank's ability to withstand disruptions, such as power outages or network failures, enabling institutions to gauge the robustness of their disaster plans.
“Stress testing isn’t just a compliance exercise. It’s about understanding how long your institution can withstand disaster-induced disruptions and how quickly you can bounce back from outages or service disruptions.” – Niki White
Ensuring an institution’s Business Continuity Plan (BCP) is not only updated, but also robust enough to maintain critical functions during a disaster was another focal point in this episode. Establishing redundancy in IT systems, like cloud-based backups and alternate data centers, was highlighted to prevent service disruptions. A clear and centralized emergency communication plan is essential to keep employees, customers, and regulators informed during crises.
Engaging with Local Authorities and Partners
Collaboration with local government and emergency services is vital for aligning institutional disaster response strategies with regional efforts. Creating local partnerships with vendors for emergency supplies and alternate power sources were also recommended to ensure seamless business operations during and after a natural disaster.
Leveraging Technology and External Expertise
The role of technology, especially risk intelligence and analytics tools, is transforming how banks and credit unions anticipate and mitigate natural disaster risks. Implementing AI tools and data-driven risk platforms can help institutions predict disasters and develop proactive strategies. Additionally, the episode underscored the value of partnering with external risk experts to enhance disaster planning, particularly in unfamiliar regions.
Board and Executive Engagement
Finally, the podcast highlighted the importance of keeping the Board and senior management engaged in natural disaster risk discussions. Regular risk reporting, along with integrating risk assessments into broader strategic planning or your ERM framework, ensures that disaster preparedness aligns with the bank’s overall risk appetite.
By taking these proactive steps, financial institutions can create a forward-looking Enterprise Risk Management (ERM) program that ensures they are well-prepared to face the growing risks posed by natural disasters, safeguarding both their assets and reputation.
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