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Dodd-Frank reforms drive increased use of enterprise risk management


The Dodd-Frank Wall Street Reform and Consumer Protection Act strengthened regulation of large U.S. financial institutions in 2010, but its effect also has trickled down to smaller financial services firms.

In response, institutions of all sizes have begun upgrading their risk management practices by implementing enterprise risk management.

The percentage of firms with less than $10 billion in assets that have an ERM program in place is 57%, while 29% say they are currently implementing ERM, according to the 2013 survey of financial institutions, “Setting a Higher Bar,” by Deloitte Touche Tohmatsu Ltd.

“Larger institutions have made the most progress in adopting ERM,” said Edward Hida, a partner at Deloitte & Touche L.L.P. in New York and author of the study.

“But we have seen that trickle down to midsize institutions. Because of expectations being driven by regulators, industry observers and other stakeholders, it is now typical for even small institutions to set up ERM programs,” he said.

“While the smallest institutions had the fewest ERM programs in place, they also had the largest amount that were implementing (an ERM program). If you add those two together, they actually had more ERM programs than either the large or midsize organizations,” Mr. Hida said.

Indeed, ERM adoption rates are climbing rapidly in response to a National Credit Union Administration directive that went into effect last April and requires those financial institutions to develop and follow an ERM policy, industry observers say.

To assist with this transition, the Alexandria, Va.-based NCUA sponsors ERM education seminars conducted by The Rochdale Group Inc. of Overland Park, Kan., which also markets project implementation and consulting services as well as software to credit unions and community banks.