How to Remediate Regulatory Exam Findings in Financial Services

Corrective actions are a common requirement following regulatory examination findings and enforcement actions (e.g., MRAs and consent orders), regardless of how proactive an organization may be. Therefore, you must use a systematic approach to provide evidence of successful risk remediation and effective controls. This article shows how to develop and execute remediation plans.

Strategic Remediation: A Proven Approach to Corrective Action Planning and Sustainability

Even the most proactive organizations have examination findings with required corrective actions. Organizations can effectively remediate regulatory exam findings by developing a methodical approach that facilitates effective and sustainable solutions.

For over two decades, Bridgeforce has swiftly resolved thousands of internal and external audit findings for both top-tier global banks and mid-size lenders and credit unions. Our team, comprised of former regulatory, operations, and IT executives, specializes in process reengineering, automation introduction, training provision, and the development of policies, procedures and controls to ensure compliance.

The Bridgeforce program offers concrete proof that reported risks have been effectively remediated and that the implemented controls are functioning effectively. While most clients understand what needs to be done, the challenge often lies in knowing how to do it effectively.

Establish a Project Infrastructure: The Key to Sustainable Corrective Action Planning

An established project infrastructure will lay the foundation for successful project execution by promoting efficiency, communication, documentation, and stakeholder satisfaction. It provides a solid framework that supports the entire project lifecycle, from initiation to completion.

Establish this framework by centralizing the management and evaluation of findings, creating project governance, and building your remediation team(s):

Create Centralized Management & Evaluation of Findings

Form a small task force with working knowledge of the functional areas impacted. Part of the team should evaluate findings and communicate individual responsibilities as other group members distill the information and begin formal remediation planning. By consolidating exam findings, you can prioritize efforts and address them in the form of a single comprehensive reference document.

Establish Project Governance

It’s crucial to establish a dedicated core project team. This could be a single project manager (PM) with partial allocation or a fully dedicated project management office (PMO). These resources act as the central command for the remediation task force. Project team members drive toward the collective goal of preparedness to meet the demands of examination finding remediation.

Build Remediation Team(s)

After categorizing and prioritizing findings, form remediation teams to address them. The team size, ranging from a few key individuals to multiple groups across various areas, depends on the remediation effort’s scale. We advise assigning roles and structuring the team based on the effort’s size.

These are the key roles for the team:

• Work Stream Lead
• Remediation Manager
• Remediation Team Members
• Business Area Subject Matter Expert
• Reporting and Technology Owner

Establish Reporting Strategy

Effective reporting is critical to ensure that all stakeholders are informed about remediation progress and any obstacles in satisfying remediation obligations. When regulatory enforcement results in a consent order, the sanctioned entity will be required to provide frequent updates to the regulator. So, we recommend defining a reporting strategy with an inventory of reports and dashboards that include a description of each report, information/data sources, its purpose, audience and frequency. The strategy should also include clear procedures for how reports are generated and the approval hierarchy to be executed before reports are submitted to regulators.

4 Steps to Implement Corrective Actions that Remediate Regulatory Exam Findings

Step 1: Gather all internal and external audit findings along with ongoing action plans. Then, use this information to create a consolidated master list, which aids in prioritizing tasks, assigning ownership, and driving results. Create a task plan and issue review process.

Step 2: Gain stakeholder consensus on the remediation process. This may include a temporary halt or the initiation of new reviews (2nd/3rd line of defense) for areas within the agreed-upon scope. The process for self-identified issues continues as usual.

Step 3: Execute the remediation process, achieve issue closure through a tollgate process, and continue to identify further improvements to controls, procedures, and processes.

Step 4: Start recertification activities. These will verify and certify that the resolved issues remain closed, and they’ll ensure the implementation of all other ongoing enhancements for sustainability.

Proactive Mitigation of Examination Findings: A Systematic Approach to Compliance and Operational Excellence

A systematic approach to exam findings remediation not only reduces the burden of exam findings but also ensures sustainability. Initiating remediation while an exam is ongoing can lessen the impact on business operations.

By implementing a robust project management methodology, remediation efforts can be managed systematically. This environment establishes clear roles and responsibilities for resources, ensuring that corrective actions are promptly and thoroughly executed. This approach reduces the time spent on each issue, allowing managers and strategists to focus on business growth.

While examination findings are inevitable, proactive measures can mitigate their impact. You’ll achieve this by promptly addressing issues, preparing for future exams, and fostering a culture of operational control excellence. This strategy significantly reduces the risk of costly fines and extensive remediation activities, and it can improve relations with regulatory bodies.