Examiners don’t like surprises. That’s why proper exam management is critical. When a financial institution is fully prepared for an exam, understands how to engage with examiners, and has plans to follow up on exam findings, it not only makes an examiner’s job easier, it helps your institution avoid unnecessarily stressful exams and unwelcome regulatory findings.
Here are a few exam management tips to help your institution confidently navigate its next exam.
1. Set a Positive Tone with Prompt, Friendly Communication
Communication is the cornerstone of exam management – not just during the exam but throughout the year. Treat your examiner like a partner in achieving the same goal: improving your financial institution's performance.
Communicate with regulators before your exam, promptly responding to all calls, requests, and inquiries. Just like you, examiners are busy. It won’t help your institution to frustrate them with delayed responses.
The same holds true for the actual exam. Anticipate examiner questions and have reports and other documentation ready. If you need to fumble for answers to examiner questions, it won’t inspire confidence.
Continue to build rapport with examiners by reaching out to them in between exams. If your institution is thinking about entering a new market or line of business, seek out feedback from your examiner, especially if it’s a higher-risk activity. Always ask for permission, not forgiveness.
2. Prepare Staff to Interact with Examiners
An exam isn’t just a test for the compliance and risk staff at your institution. It’s a review of the whole institution and everyone needs to prepare. Your institution’s exam point person (typically a compliance officer or risk manager) is responsible for managing the examiner relationship, but it’s likely the examiner will want to talk to others. Make sure staff is prepared to answer examiner questions. They should also be available to address any issues that come up.
Related: 3 Things Compliance Officers Should Do to Prepare for an Exam
3. Leverage Risk Assessments to Prepare
Exams are risk-based with examiners prioritizing their attention on areas of greatest risk. That makes compliance risk management essential. Make sure your institution is engaged in each step of the risk management lifecycle:
- Risk identification
- Risk assessment
- Risk mitigation
- Risk monitoring
- Risk reporting
Use your compliance risk assessments to anticipate the areas examiners will be focusing on. It should be easy since your institution should have already allocated resources to managing these areas of high compliance risk.
Related: Risk Management Aids Prep for Risk-Focused Exams
4. Gather Data to Tell Your Story
Data is the best way to tell your institution’s story, but to do that, you first need to understand it. Data isn’t just numbers – it's all your documentation from policies and procedures to board minutes.
Before meeting with an examiner, review your data to understand what it says about your risk and compliance efforts – both good and bad? What steps have you taken to mitigate risks? Are your controls effective? If you’ve identified instances where you’ve fallen short, can you demonstrate improvement efforts?
For example, if you’ve recently introduced a new product, try creating a framework to explain your process for managing risk and the outcome.
Document:
- The strategic reasons for introducing the product
- The potential risks
- Controls such as policies and procedures for managing the risks
- Results
- Areas of concern
- Future plans
Related: Ask the Examiner: Your Exam Questions Answered by a Former OCC Examiner
It’s also a good idea to highlight the effectiveness of your change management processes and share any major changes to policies and procedures. You want your examiner to know that your institution is proactive and committed to staying up to date.
5. Show off Your Findings Management
Findings are a part of banking. They can come from compliance reviews, audits, or previous exams. An institution with no findings isn’t perfect. It’s just not looking hard enough.
Self-identified findings from audits and compliance reviews show that your risk management system is working. This is a good thing. The problem emerges when your institution doesn’t catch mistakes – or doesn’t do anything once a mistake is identified.
Related: Six Findings Management Practices Examiners Are Looking for at Financial InstitutionsBe prepared to show examiners:
- Corrective actions taken to address findings
- A root cause analysis explaining the source of the finding
- An action plan for the finding, such as additional employee training, changes to policies and procedures, or changes to your risk management processes and systems
- Evidence the action plan has been enacted.
- Proactive monitoring and follow up to ensure corrective actions are having the desired impact
- Senior management involvement
6. Conduct an Exam Postmortem
After receiving your exam results, conduct a postmortem.
Review all findings to understand any deficiencies your examiner uncovered. Identify the findings that pose the greatest risk to your institution and prioritize them for remediation. Create a detailed action plan for remediating each finding, including a timeline and assignment of tasks and overall responsibility. Continuously monitor remediation efforts and determine if they are effective. Document everything.
Related: Remediating Regulatory Trouble: Your Step-by-Step Guide
Don’t be afraid to reach out to your examiner to discuss exam findings, provide updates on remediation efforts, and seek clarification on any unclear points.
It’s also helpful to look at the big picture. Did the exam go as expected or were there unanticipated challenges? If things didn’t run as smoothly as you’d hoped, you need to diagnose what went wrong.
- Did you have significant or unexpected findings?
- Did you struggle to provide everything the examiner needed?
- Was there friction between the institution and the examiner?
- Did you have trouble understanding expectations?
This gives you time to adjust your approach before the next exam.
Effective Exam Management
Effective exam management is a crucial part of running a successful financial institution. By following these tips—setting a positive tone with communication, preparing staff, leveraging risk assessments, gathering data to tell your story, showcasing your findings management, and conducting thorough post-exam analyses – your institution can approach exams with confidence and professionalism.
Remember, exams are not just about compliance. They're opportunities to demonstrate your institution's commitment to risk management and continuous improvement. By viewing examiners as partners rather than adversaries, and maintaining open lines of communication throughout the year, you can foster a productive relationship that benefits your institution in the long run.
Ultimately, good exam management practices don't just make exams easier—they contribute to a stronger, more resilient financial institution. By integrating these strategies into your regular operations, you'll be well-prepared not just for exams, but for the everyday challenges of risk and compliance management in the financial sector.
Want to learn more about exam management?
Watch our on-demand webinar How to Work with Examiners.
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