Risk Management Community of Practice (CoP) - ESG Risk Monitoring using AI
The Risk Management Community of Practice (CoP) is a Member-Only event and it aims to bring together professionals and risk management experts from member institutions of the SME Finance Forum to share their learning, experiences, and good practices examples with their peers. The scale and complexity of financial institutions and the pace of their financial transactions demand that they employ sophisticated risk management techniques and monitor rapidly changing risk exposures. At the same time, advances in IT innovation and solutions have lowered the cost of acquiring, managing and analyzing data, and have enabled considerable and ongoing advances in risk management at leading institutions. Financial institutions in emerging market countries are also increasing their focus on risk management in order to build more robust and sound financial systems, to remedy weaknesses that were exposed by the recent crisis.
ESG risk monitoring using AI
Effective credit risk management requires financial institutions to evaluate the characteristics of both the borrower and the loan to understand the probability of default and to calculate the expected loss. Characteristics of the borrower could include character, capacity, and capital, while loan characteristics could factor in conditions and collateral among others.
However, a well-rounded evaluation of the borrower and the loan must also include environmental, social, and governance factors (ESG). For example, potential or actual changes to the physical or natural environment (e.g., pollution, resource use); potential or actual changes to surrounding community and workers (e.g., health and safety, supply chain); and corporate governance structures and processes by which companies are directed and controlled (e.g., board structure and diversity, ethical conduct, disclosure, and transparency).
Accurate and timely ESG data and analysis are critical for monitoring of ESG risks. However, the quality, types, and frequency of data collection vary greatly across financial institutions.
Join this meeting on November 16, 2022, at 8 AM EST to learn and discuss:
- What types of ESG data do financial intuitions collect? How are the data collected and analyzed?
- How are ESG data factored in borrowers' risk assessment?
- What are the main lessons learned regarding the cost and benefits of collecting and analyzing ESG data?
Syed Abdul Momen is the head of SME Banking at BRAC Bank. He joined BRAC Bank in August 2005 and has been instrumental in making BRAC Bank the undisputed leader in the small business lending space in Bangladesh. He has over 18 years of multifaceted experience in the Banking Sector across Technology, Operations and Business Functions.
Deyi WU is the Head of AI Asset Management Business in WeBank responsible for product development and commercialization of financial products by leveraging alternative data such as satellite imageries and geospatial data combined with AI technology to generate quantitative insights and ESG products.
Caroline Bright is the IFC’s Regional ESG Advisory Lead for Latin America, Eastern Europe, Central Asia, Turkey, Middle East and Pakistan. Caroline is responsible for rolling out IFC’s integrated ESG advisory program to support IFC's strategic priorities, promoting better sustainability practices in firms and financial institutions. Caroline has over 20 years of experience working with firms and financial institutions in emerging markets. She has supported clients on their strategic development, micro and small business banking, and improving the risk management of banks and microfinance institutions in Eastern Europe and the former Soviet Union. She has served on several supervisory boards of microfinance organizations in Eastern Europe, and advised various firms on board efficiency and the integration of corporate responsibility, including environmental and social aspects, into governance processes..