You are the newly appointed senior risk officer at Business Direct (BD), a firm operating and regulated in a sector and jurisdiction of your choice. During your first week in your new post, there are reports in the media of a regul

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Task 

All parts of the question can be answered in relation to a jurisdiction with which you are familiar.
The name of the jurisdiction you have selected should be clearly stated in your answer.

Answer all parts of the question.

Question
You are the newly appointed senior risk officer at Business Direct (BD), a firm operating and regulated in a sector and jurisdiction of your choice.
During your first week in your new post, there are reports in the media of a regulatory sanction concerning Advancex International (AI), one of BD’s direct competitors, which offers similar products and services. The reported sanction relates to weaknesses in the systems and controls relating to a popular product. Details of this scandal have come to light through a ‘whistle-blower’ who has expressed concerns that these matters were not being taken seriously by senior management.

The executive board of BD have asked for reassurance that sufficient measures are in place to ensure that there is no possibility that BD will be the subject of similar negative publicity. As you are not yet fully familiar with the current situation at BD, you invite several of your more experienced risk colleagues to a meeting to discuss this scandal and the issue of reputational risk more generally. In advance of that meeting, you familiarise yourself with the output of recent compliance monitoring and other relevant management information (MI) produced internally for BD. Following your review of this, you are concerned about what you find. Your initial reading of the current situation at BD can be summed up as follows.

MI is not being submitted in a timely manner
MI in relation to key issues is not being effectively collated
Limited activity appears to be being undertaken to identify and assess risks in the firm
Risks are dealt with only on a reactive basis
Risk assessment activity is ad hoc, senior managers are not kept informed and/or the risk assessments do not influence the design and implementation of relevant policies and procedures in the firm
Limited quality assurance activity is carried out to review the effectiveness of existing systems and controls
There is limited senior management involvement in, and challenge to, compliance activities.

 

You can also see that there have been concerns about such issues for some time, but there is very little indication of what action has been taken to address them so far or who, if anyone, has attempted to take charge of the problem.

Part 1
With reference to the information provided in the above scenario, explain:

what immediate action you would now take and why
 those with whom you would liaise and why
the basis on which you would prioritise your next steps. You should provide a rationale for your approach to each of these points.

 

Part 2
Prepare a short report for the executive board of BD that:
a) provides an overview of the current position identified in the scenario and your response to Part 1
b) identifies what you believe to be the key areas of concern for BD
c) clearly explains the likely consequences for BD if these concerns are not addressed
d) sets out your short-term, medium-term and longer-term strategies for mitigating the key identified risks.

Subject matter overview

Theme One

Methodologies used by regulators – athematic visit
Risk management and compliance systems and controls, and their importance
Accountability and responsibility withingovernance mechanisms?
Understanding of risks from:
Inconsistency and lack of clarity – what are the risks?
Integration of risk management systems and controls
Record keeping importance
Reporting failures and the possible consequences

Theme Two

Summarising the findings
communication
Justification – of risks in this case
Being proactive – proposals and
recommendations for action, with

justification

Responsibility and accountability
for actions – with justification
Evidence and examples to
reinforce your arguments

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