Compliance with regulatory requirements is a key priority for financial institutions. When you have over 2,500 branches across the country offering multiple products and services over several platforms through many channels, risk is complex.
Our branch operations team was tasked with updating the branch audit process to improve efficiency. Under the existing system each branch was reviewed annually. Audit teams reviewed 72 deposit activities and another 64 lending operations process performed daily in each branch. Each audit took several days to complete and a findings report was produced.
To streamline the process and prioritize the audits, the team:
- Reviewed existing audits to identify items that frequently received a fail or unacceptable rating and areas of the country that had the poorest ratings
- Evaluated the relative importance of each item and developed a risk rating for each that reflected the likelihood of regulatory sanctions and fines, financial loss, negative reputational impact, and general operating risk
- Developed a scorecard to provide more precise reporting and focus management attention on those items and areas of the country that posed the greatest risk
Reduced the total number of annual branch audits each year and raised performance of high-risk locations. A new ratings system was developed and approved by internal audit and the regulators that created three branch classifications – “Good, Acceptable, and Poor.”
Those that received a ‘Good’ rating were moved to an 18-month review schedule. Acceptable rated branches continued to be reviewed on a 12-month basis with an action plan in place to move them to a Good rating. Poor performing branches were put on a 6-month review schedule and project team member was assigned to the branch to work with branch managers to institute best practices found in high performing banking centers.
The system allowed the auditors to focus on the greatest risk areas while providing much needed, targeted guidance to improve performance.