Critical Thinking and Decision

Risk Mitigation Practices Becoming Less Stratified Sinnock, Bonnie . Origination News ; New York  Vol. 23, Iss. 1,  (Oct 2013): n/a.

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ABSTRACT  

Although risk management has been divided into specialty areas such as quality assurance, quality control, vendor

risk management or fraud prevention, many are transitioning toward a more holistic approach, according to

Michael Larkin, director of risk management at Indecomm Global Services. Larkin said limiting what departments

like quality assurance, quality control and fraud prevention share can limit a company's view of potential risks. FULL TEXT  

Although risk management has been divided into specialty areas such as quality assurance, quality control, vendor

risk management or fraud prevention, many are transitioning toward a more holistic approach, according to

Michael Larkin, director of risk management at Indecomm Global Services.

Larkin said limiting what departments like quality assurance, quality control and fraud prevention share can limit a

company's view of potential risks. Information from a loan file should be shared "as instantaneously as possible"

to get a clear view of risk, Larkin said.

Some companies are going so far as to combine these different departments and Larkin said this can work, but

notes that if this is done the expertise in these specific areas needs to be retained, potentially through cross-

training.

"A lot of the teams have subject matter experts who train the others so there is sharing of information instead of

niche knowledge bases," he said.

Larkin said there may be consolidation and cost savings in such a move which can be made internally or by

shifting to an outsourcer like his company, but he notes that cuts too deep or reliance on too few parties can be

inefficient.

He compared optimal analysis of possible risks highlighted by manual review or automation as similar to the use

of a watchdog, where the dog will bark frequently, and the owner has to judge whether there is a real threat

present. The trick is not to stop the dog from barking but for the owner to be able to discern false positives, said

Larkin.

Besides maintaining expertise in all specialty areas, he recommends that a company or an outsourced provider

maintain staff for manual review as well as automated tools.

He also advocates for the use of multiple fraud prevention/loan quality tools as a way to get a more complete and

balanced picture of a loan's potential risk. Alerts in the risk management process also can be prioritized through

giving certain ones more weight than others, he said.

But he also noted that risk management can get too detailed to the point where one cannot see the forest for the

trees. While a questionnaire used in audits/reviews or its equivalent may average 150-180 questions or so and that

may be appropriate, the upper extreme around 450 questions may be overkill.

When about the state of fraud risk today, Larkin said, "Fraud numbers are down, depending on who you listen to"

but he does believe this risk will rise along with interest rates as the impetus to find a way to get borrowers

approved for loans grows.

"It's one of those areas lenders can never afford to downsize," he said.

Larkin said in some cases managing fraud risk can sometimes be more about paying attention to situations where

loans seem too perfect than finding ones with flaws. If a loan looks too good to be true, it may be, he said.

He also advises ongoing reviews of risk management measures as risks to tend to change with the times.

Credit: By Bonnie Sinnock DETAILS

Subject: Mortgage companies; Risk management; Business conditions; Market strategy

Location: United States--US

Classification: 9190: United States; 9000: Short article; 8120: Retail banking services; 3300: Risk

management; 7000: Marketing

Publication title: Origination News; New York

Volume: 23

Issue: 1

Pages: n/a

Publication year: 2013

Publication date: Oct 2013

Section: News

Publisher: SourceMedia

Place of publication: New York

Country of publication: United States, New York

Publication subject: Business And Economics--Banking And Finance

ISSN: 10838481

Source type: Trade Journals

Language of publication: English

Document type: General Information

ProQuest document ID: 1438177318

Document URL: https://search.proquest.com/docview/1438177318?accountid=35812

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Last updated: 2013-10-17

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