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Recent UBS and New York Community Bank Buyouts: Lessons Learned on Enterprise Risk Management

Mar 22, 2023

The recent banking buyouts have taught us a valuable lesson in enterprise risk management, and as a seasoned digital transformation leader with years of experience as a CISO and risk management executive in the banking industry, I know how important this lesson is. The UBS takeover of Credit Suisse and New York Community Bank's purchase of failed Signature Bank are both vivid examples of how proper risk assessment and management can mean the difference between success and failure in the volatile world of finance. The following are risk management insights and lessons we can glean from these high-stakes business moves and why they should matter to you. 

The Importance of Enterprise Risk Management in Banking Buyouts 

Recent banking takeovers provide important lessons in enterprise risk management, especially when viewed through the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Enterprise Risk Management (“ERM”) guidelines and recommendations. The COSO ERM framework provides effective enterprise risk management practices, including guidelines specific to the financial services and banking industry. The UBS takeover of Credit Suisse and New York Community Bank's purchase of failed Signature Bank demonstrate the importance of following these guidelines. COSO specifically advises banks to establish a practical risk management framework that includes identifying, assessing and mitigating risks and implementing a solid governance structure to ensure effective risk oversight. By following these guidelines, banks can reduce their risk exposure and ensure long-term success in a rapidly evolving industry. These recent buyouts serve as a reminder that a practical risk management framework is crucial to successfully navigating the complexities of the banking industry and setting a course for sustainable growth. 


Insights from Recent Banking Takeovers and the Importance of COSO and ERM 

With this in mind, these banking buyouts highlight the importance of following the COSO banking ERM guidelines and recommendations. These buyouts show how proper risk assessment and management can impact the success or failure of major business decisions. The UBS buyout serves as a primary example of why it is crucial to conduct thorough due diligence before making any significant business decisions, particularly in mergers and acquisitions. In this case, UBS had to raise its offer to close the deal, highlighting the importance of properly assessing and managing risks.1 Due to perceived risk, poor financial performance, unforeseen risks, and legal and regulatory risks, insufficient risk management and a lack of a mature ERM framework can raise the deal amount.  

Secondly, New York Community Bank's acquisition of failed Signature Bank reminds us of the risks associated with bank acquisitions. Signature Bank had regulatory issues and was placed under FDIC receivership in this case, so New York Community Bank had to navigate a complex regulatory landscape to ensure a smooth transition. 2 This highlights the significance of having a strong risk management framework in place to identify and mitigate potential risks and the need for strong regulatory compliance and governance processes. Potentially, if Signature had a strong ERM framework in place, this would have improved the bank's financial stability and reduced the risk. 

Final Thoughts and Conclusions 

Finally, as the banking industry continues to undergo rapid digital transformation, effective risk management is becoming increasingly important. To remain competitive and compliant while meeting customer demands for seamless digital experiences, banks must keep up with the evolving risk landscape. With recent banking buyouts and other merger and acquisition deals serving as a valuable reminder of the importance of risk management, banks must stay ahead of the curve by implementing a practical risk management framework. Comprehensive due diligence, ongoing risk assessment and a solid operational and technology governance structure are all part of maintaining effective risk oversight. Banks can reduce their risk exposure, ensure regulatory compliance, and thrive in the digital banking landscape by following the COSO banking ERM guidelines and recommendations. 

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