#105 Todd Miller on Model Risk, Credit Risk, Interest Rate Risk, ERM & More

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EPISODE CHAPTERS WITH FULL SUMMARIES ---------

(0:00:00) - Managing Model Risk in Enterprise Management (16 Minutes)

We discuss model risk, interest rate risk and credit risk and the importance of enterprise risk management. Todd shares his insights on how institutions need to inventory and categorize the risk of their models and how they can effectively challenge the results of their models to understand the whole story and identify potential risks. We also emphasize the importance of informed conservatism when making decisions and stress testing multiple variables at the same time.

(0:16:23) - Credit Union Challenges and Risks (13 Minutes)

We examine how government assistance during the pandemic affected credit unions and their loan-to-share ratios. We explore the impacts of inflation on deposit growth and the role it played in the fast growth of loans. We also discuss how the composition of deposits in credit unions is different from banks, with credit unions having only 9% uninsured shares, and the importance of tracking large depositors.

(0:29:06) - Balance Sheet Strategy and Risk Management (2 Minutes)

We explore fund transfer pricing models and the need to understand how and why an institution is making money. We also consider the importance of managing interest rate, liquidity and credit risk together, rather than in silos, in order to keep balance sheet metrics in line with credit risk. Tune in tomorrow to hear more about liquidity risk.