Impact of the Appraisal Function on Operational Risk

Duration: 60 Minutes
The regulators want financial institutions to comply with their appraisal guidance. But more importantly, the regulators intend for banks to recognize and avoid situations that create risk for their specific institution. Operational risk incorporates many of the other types of risk an institution can face. There are some conditions under which a faulty appraisal program can inflate a bank's operational risk. This webinar will look closely at those situations and options to avoid them.
Appraisal Function on Operational Risk
Instructor: Heidi Lee
Product ID: 503782
Objectives of the Presentation
  • You will learn how the interagency appraisal and evaluation guidelines stresses risk assessment in the appraisal program
  • You will learn the definition of operational risk and how this flows through the entire organization, including the appraisal function
  • You will learn that operational risk can be managed, but not completely eliminated
  • You will learn about ORM, a discipline and practice for managing operational risk
  • You will learn the problems with retaining a more traditional system of risk discipline silos
  • You will learn the importance of transparency in the ORM process
Why Should you Attend
  • Banks are astute in assessing credit risk, but often underestimate the risk to the institution from lack of full compliance with the Interagency Appraisal and Evaluation Guidelines
  • Most banks are not aware that inefficient and improper linkages of the appraisal function with other departments within the institution can create added risk to the institution
  • The big focus in banks is on credit risk, followed by market risk, but internal practices can also enhance risk to a bank's operation
  • Many banks' compliance monitoring and risk assessment processes overlook the appraisal function
  • This webinar provides context for a better understanding of operational risk and how the appraisal function may enhance or impair the soundness of an institution
Areas Covered
  • You will be given a framework for and ideas to allow your bank to customize its ORM program
  • You will learn the impact of the appraisal function on the institution and its operational risk
  • You will learn how, with an effective ORM program, the appraisal function facilitates loan production and also reduces risk
  • You will learn how people play a part in successful operational risk management
  • You will learn how technology can have an impact on operational risk management
  • You will learn some warning signs of poor appraisal function integration in operational risk management
Who will Benefit
  • CEOs and presidents of community banks
  • Credit administration officers
  • Chief appraisers/appraisal function managers
  • Credit officers involved in the appraisal function
  • Credit reviewers and other credit side personnel
  • Lending group managers
  • Employees tasked with elements of the appraisal function
Topic Background
Financial institutions (banks and credit unions) make loans of all sizes. Collateral is obtained to provide the institution with some form of repayment in the event of borrower default. As such, collateralized loans are considered to have lower risk than unsecured loans and longer amortization periods are made available when long-lasting real estate collateral is provided. But just having collateral does not necessarily ensure lower risk for the institution. Real estate values shift, due to market forces and specific property issues. Thus, bank regulators have embedded the valuation process within all real estate loan production. Further, institutions are mandated to install processes and personnel that can identify risk levels and effectively manage the appraisal program with greater due diligence when risk is higher. But real estate appraising is a different industry than banking, so institutions often face a steep learning curve in efforts to comply with appraisal regulations. This webinar provides introductory information for banks and credit unions to work toward meeting the regulator's appraisal program requirements.
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  • Presentation handouts in downloadable PDF format will be updated on your OCP Account within 24 hours of the purchase of the product
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Instructor Profile:
Heidi Lee is a commercial review appraiser with 18 years' experience at Whitney National Bank, a mid-sized financial institution. Since retiring from Whitney Bank in 2011, Ms. Lee has founded Appraisal Review & Consultation to share her skills and appraisal regulatory knowledge base with other financial institutions. Her firm offers commercial review services and appraisal policy/procedures assistance to small- and medium-sized banks across the country.

Ms. Lee has earned the MAI and the AI-GRS designations issued by the Appraisal Institute and the MRICS designation issued by the Royal Institution of Chartered Surveyors. She holds a general appraiser certification in Louisiana and Texas and was appointed by two governors to serve on the Louisiana Real Estate Appraisers Board. Additionally, she is a member of RMA (Risk Management Associates), with special interest in credit risk and operational risk.
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