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Dugan on Risk Management

In his February, 2007 address to the Global Association of Risk Professionals, Comptroller Dugan made some interesting - and optimistic - observations about the connection between risk management and regulation. Dugan believes that the goals of both risk managers and regulators are usually pretty well aligned and that regulators can support the efforts of risk managers. He offers the example of regulators flagging risks that some in the finance business might be willing to ignore. There is no clearer, current example of this than non-traditional, sub-prime mortgages. The regulators have issued warnings but many lenders paid no attention. This created competition and loss of business which regulators can help to mitigate.

Dugan also recommends that regulations be aligned with good risk management practices. To achieve this, regulators rely on public comments on proposals. Rules can only be aligned with risk management reality if the institutions affected by the rule educate the regulators through the comment process. And you need not wait for a formal comment period to communicate your concerns. Your regulators need to hear from you on an informal basis as well as in formal comments.

Copyright © 2007 Compliance Action. Originally appeared in Compliance Action, Vol. 12, No. 4, 04/07

First published on 04/01/2007

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