Episode 18: From Manual to Data-Driven ERM: Blackhawk Bank's Path to Success

In this episode of the Risk Intel Podcast, Karen Kleckner, a seasoned expert with over 20 years of experience at the FDIC as a bank risk examiner, shared her insights into building and implementing an Enterprise Risk Management (ERM) program at Blackhawk Bank. The episode delved into the challenges, strategies, and lessons learned throughout the journey of establishing an effective and data-driven risk management program.

Understanding The Journey

Karen introduced some of the driving forces behind Blackhawk Bank's comprehensive ERM program. With her extensive experience in the banking industry, particularly as a bank risk examiner at the FDIC, she was uniquely positioned to spearhead the bank's journey towards creating a robust risk management framework. This introduction set the stage for an enlightening discussion about the transformation that Blackhawk Bank underwent.

Initiating the ERM Program: Key Steps and Strategies

Karen elaborated on the pivotal steps she took to initiate the ERM program at Blackhawk Bank:

1. ‍Creating a Foundation: She started by developing a manual template, identifying seven essential risk categories that would serve as the foundation of the bank's risk framework, and subsequently enacted a technology platform.‍
2. Defining Risk Appetites: Collaboration with the President was instrumental in defining risk appetites, aligning the program with the bank's overall strategy.‍
3. Formed Risk Committee: To ensure effective collaboration related to risk across various departments, Karen formed a cross-functional risk committee that played a crucial role in breaking down silos and enacting the ERM program.

Leveraging Technology for Data-Driven Risk Management

One of the highlights of Karen's approach was the transition from a manual risk assessment process to a more data-driven one. Blackhawk Bank implemented SRA's Risk Intelligence software solution Watchtower, which enabled the bank to objectively assess risk, generate reports, and quantify risk exposure. This shift from subjective evaluations to data-driven methodologies proved invaluable in enhancing the accuracy and efficiency of their risk management practices.

How Did She Gain Support and Educate Stakeholders?

Karen emphasized the importance of gaining support from senior leadership and educating stakeholders about ERM. By conducting sessions to educate stakeholders, including the risk committee, on the fundamentals of ERM, she fostered a culture of collaboration and open communication within the organization. Breaking down silos was essential in building a cohesive risk-aware culture.

Interacting with Regulators and the Risk Maturity Framework Assessment

Karen's proactive approach extended to regulators. While regulatory bodies did not explicitly request the ERM information provided, as a best practice Karen shared detailed reporting from their ERM platform with regulators. This ensured that the bank's commitment to robust risk management practices was evident. Additionally, the episode touched on the risk maturity framework assessment, an annual evaluation exercise Karen did of the bank's risk management maturity. By leveraging the RMA Risk Maturity Framework tool, she was able to track year over year progress and it also served as a roadmap for growth and improvement.

Conclusion: Building a Culture of Risk Management Excellence

In conclusion, this episode emphasized the importance of collaboration, communication, and adaptability in building a successful ERM program. Karen Kleckner's journey at Blackhawk Bank offered valuable insights into the challenges and strategies organizations can employ when establishing and evolving their risk management frameworks. By combining a data-driven approach with a culture of awareness and continuous improvement, businesses can effectively navigate the dynamic landscape of risk management.

On August 15, 2023 First Mid Bancshares, Inc. announced the acquisition of Blackhawk Bancorp, Inc. was completed. As of June 30, 2023, Blackhawk had approximately $1.3 billion in total assets, $1.2 billion in deposits and $784 million in loans through 10 locations in Illinois and Wisconsin. With the completion of this acquisition, First Mid has approximately $8.0 billion in total assets. The conversion of accounts from Blackhawk is expected to happen in December of this year.

Are you looking to enhance your organization's risk management practices?

Blackhawk Bank's journey provides a compelling roadmap towards building a culture of risk management excellence across the entire organization. Learn how SRA can assist you on your risk journey today.

‍