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“...This Above All, To Thine Own Self Be True...” – Who knew Shakespeare was a risk manager?


And Fannie Mae would channel Hamlet’s ill-fated Polonius with their Risk Self-Assessments.


Here’s a short clip of Polonius’ wisdom-for-the-ages discussion with Laertes from one of the countless productions of Hamlet.



Shakespeare understood that without an honest look at our strengths and weaknesses, growth would be elusive and goals out of reach. We won’t know how to utilize our advantages or work on what is holding us back. Similarly, success in business is about knowing what risks to take, what risks to control, and what risks to avoid. And the art of knowing starts with objectively assessing your current risk profile. Mortgage lending is fraught with risk. Fortunately, Fannie Mae has developed some outstanding tools for lenders to understand their risks. As you build risk self-assessments (SA) using all 12 of Fannie Mae’s functional area questions and best practices you will become significantly more confident in your decision making. A leader in your organization should own each of the 12 - and review and update them at least quarterly - to ensure your organization adapts to new and changing risks. Make them living documents, not a one and done exercise. Begin with the Quality Control Self-Assessment; it’s the first one Fannie created and became the gold standard for industry. And just about everything in it is essential to ensure compliance with Fannie’s QC requirements.


Next, taking a cue from Shakespeare, look inward at the big picture with the enterprise risk self-assessment. In a previous post I highlighted how most organizations don’t respect or empower their Chief Risk Officer (CRO), or the risk management function in general. Chew hard on whether that is an issue for your firm. Make the simple, but powerful change to vest risk with an independent/equally respected voice. If possible, create a dual reporting relationship to the board or an individual not responsible for day-to-day decision results. These steps exponentially increase the odds of organizational success. Even if your firm is too small for a formal CRO or risk function, every organization can create a risk committee that attempts to objectively evaluate risk. The third highest priority SA is Internal Audit (IA). If the CRO job is considered thankless, then most internal audit functions are often the completely forgotten side of the organization. But establishing a productive, collaborative relationship with IA will head off regulatory findings and provide early warning indicators to prevent catastrophic meltdowns. I could recite a list of who’s who of companies that wished they had instituted this discipline.


Fannie Make Risk Self-Assessments uncover your organization’s true self. Even though easy to understand, the challenge for many lenders is they have a hard time being objective when completing these SAs. Too many biases or turfs to protect influence the objectivity and results. Partnering with SWS Risk Advisory to methodically develop these SAs will drive lasting operational improvement. No agenda, no politics.


It's not Hamlet, but here is a good intro to Fannie’s Risk Self-Assessments by two of Fannie Mae's Risk Management Leaders.



Of course, with the current state of the mortgage business maybe we should have heeded Polonius’ other advice to Laertes “…neither a borrower or lender be…” and saved ourselves the headache.


For current and past “plays” (editions) to “The Two Minute Drill” click here. And/or to start a conversation on how we, and our awesome sponsors can help you with your Risk Management and QC needs go to:


QC Ally – “Your Partner in Tech Enabled Enterprise Loan Quality”




MQMR – “Helping our clients climb higher by bridging the gap between risk and compliance”




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