1. Hosted By Mike Gallagher October 2015 Risk Management And Compliance

2. Risk Management Risk governance Risk categories Stress Testing Third Party Risk Compliance Hot Topics BSA Regulatory burdens Customer Service Today’s Agenda

3. Who Owns The Risk? Board of Directors Audit or Risk Committee Chief Executive Officer Chief Risk Officer Management Risk Committee Department Heads/Branch Mgr. Vendor owners Everyone Risk Governance

4. The role of Risk in Strategic Planning Capital and finances Products Technology People and culture New markets Risk Governance

5. Credit Risk – The risk to earnings or capital arising from an obligor’s failure to meet the terms of any contract with the Bank or otherwise to perform as agreed. Reputational Risk – The potential that negative publicity regarding an institution’s business practices, whether true or not, will cause a material decline in the customer base, costly litigation, or revenue reductions. Risk Categories

6. Compliance/Legal Risk – The risk arising from violations of or nonconformance with laws, rules, regulations, internal policies and procedures, or ethical standards. Operational Risk – The risk arising form fraud, error, and the inability to deliver products or services, maintain a competitive position and manage information. (Including Cyber Security Risk) Risk Categories

7. Interest Rate Risk – Risk that the Bank’s net interest margin income will be adversely and significantly impacted by changes in interest rates. (Internal) Market Risk - The risk of an increase or decrease in the market value/price of a financial instrument. (External) Capital Risk – Risk that the bank does not maintain sufficient capital to effectively manage its operations. (Basel III) Risk Categories

8. Liquidity Risk – Risk that the Bank does not have the ability to raise cash, when needed, at a reasonable cost with minimal loss of principal. Who Owns Risk? Risk Categories

9. Measuring the Impact on Capital Loans Liquidity Capital Commercial Real Estate Interest Rate Risk models Building the right scenarios Stress Testing

10. Vendor Management Due Diligence –Contracts –Information Security –Business Continuity –Hiring Practices –Financial Reports –SSAE 16 Reports –Site Visits Third Party Risk

11. Vendor Management Contract Reviews 4 th Party Risk Access to NPPI International Vendors Third Party Risk

12. Think About: Who Owns the Risk at your Bank or in your department? Risk Management

13. Know Before You Owe (TRID) Know Your Customer –Beneficial Ownership Medical Marijuana HMDA Overdrafts UDAAP Fair Lending Compliance Hot Topics

14. Regulatory Burden Cost Complexity # of new hires Federal and State Impact on Customer Service Cost of Non-compliance Penalties Restrictions on growth Compliance Governance

15. Conducting an evaluation of the Executive Director Provide valuable feedback Gather feedback from other stakeholders Don’t be afraid to be critical of performance Setting Salaries –Performance vs. merit increases –Market comparisons –Other benefits and total rewards »Insurance »Education »Variable compensation Becoming An Effective Board Member

16. Keep up on changes Be willing to adapt to change Find a way to make risk management and compliance a competitive advantage. Have Fun!!! Summary

17. Hosted By Mike Gallagher October 2015 Risk Management And Compliance