Exercise 1: Strategic Risk Identification and Assessment Prompt Engineering

Objective:

Learn to craft effective prompts for GenAI to identify and assess emerging strategic risks across the enterprise.

Background:

Chief Risk Officers are responsible for identifying, assessing, and managing risks that could impact the organization's strategic objectives. A key challenge is developing a comprehensive view of emerging risks across multiple domains.

Exercise:

1. Scenario:

You need to prepare a comprehensive analysis of emerging risks for an upcoming board presentation, covering multiple risk domains (credit, market, operational, strategic, cyber, regulatory).

2. Basic Prompt Example:

What are the top risks facing financial institutions today?

3. Prompt Improvement Activity:

  • Identify the limitations of the basic prompt (lack of specificity, context, and structure)
  • Add details about your institution's profile and strategic priorities
  • Include information about the current risk landscape and economic environment
  • Request a structured analysis with specific risk scenarios and potential impacts

4. Advanced Prompt Template:

I am the Chief Risk Officer at a [size/type] financial institution preparing a comprehensive emerging risk analysis for our board of directors. Our institution has the following profile:

Institutional profile:
- Primary business lines: [e.g., retail banking, commercial lending, wealth management, etc.]
- Geographic footprint: [regions/countries]
- Asset size: approximately $[X] billion
- Strategic priorities: [e.g., digital transformation, expansion into new markets, cost efficiency]
- Current risk appetite: [conservative/moderate/aggressive in specific areas]

Current environment:
- Economic conditions: [brief description of current state and trends]
- Regulatory landscape: [key regulatory developments or focus areas]
- Competitive dynamics: [emerging competitive threats, industry consolidation]
- Technology trends: [relevant technological disruptions]
- Geopolitical factors: [relevant geopolitical tensions or developments]

Board presentation requirements:
- Comprehensive coverage across risk domains (credit, market, operational, strategic, cyber, regulatory)
- Forward-looking perspective (12-24 month horizon)
- Quantitative and qualitative risk assessments
- Potential impact on strategic objectives
- Recommended risk mitigation strategies

Please help me develop a comprehensive emerging risk analysis by:

1. Identifying the top 2-3 emerging risks in each of these domains:
   - Credit risk: [specific to our portfolio composition]
   - Market risk: [relevant to our balance sheet structure]
   - Operational risk: [considering our business model and processes]
   - Strategic risk: [in context of our strategic priorities]
   - Cyber risk: [relevant to our digital footprint]
   - Regulatory risk: [specific to our business activities]

2. For each identified risk:
   - Provide a clear risk statement with potential triggers
   - Assess potential impact (financial, reputational, strategic)
   - Evaluate likelihood and velocity (how quickly it could materialize)
   - Identify early warning indicators we should monitor
   - Suggest potential risk mitigation strategies
   - Describe interconnections with other risk domains

3. Recommend an approach for:
   - Prioritizing these risks based on their potential impact and likelihood
   - Integrating them into our enterprise risk management framework
   - Developing appropriate risk appetite statements
   - Communicating effectively to the board and senior management
   - Establishing ongoing monitoring mechanisms

Format your response as a structured risk analysis that I can use to prepare a comprehensive board presentation on emerging risks.

5. Evaluation Criteria:

  • Does the prompt clearly describe the institutional profile and strategic context?
  • Does it provide sufficient information about the current environment?
  • Does it request specific risks across multiple domains with detailed analysis?
  • Does it ask for practical mitigation strategies and monitoring approaches?

6. Practice Activity:

Create your own advanced prompt for strategic risk identification related to:

  1. A significant strategic initiative (e.g., digital transformation, merger/acquisition)
  2. A major economic shift (e.g., rising interest rates, recession)
  3. A changing competitive landscape (e.g., fintech disruption, new market entrants)

Exercise 2: Integrated Risk Reporting Prompt Engineering

Objective:

Develop skills to craft prompts that help create comprehensive, integrated risk reports that effectively communicate across multiple stakeholder groups.

Background:

Chief Risk Officers must communicate complex risk information to various stakeholders, including the board, regulators, and business leaders. A key challenge is creating clear, actionable risk reports that integrate insights across risk domains.

Exercise:

1. Scenario:

You need to develop an integrated risk report that provides a holistic view of the organization's risk profile for the board risk committee.

2. Basic Prompt Example:

Create a risk report for our board meeting.

3. Prompt Improvement Activity:

  • Identify the weaknesses in the basic prompt
  • Add specificity about the report purpose and audience
  • Include context about key risk areas and current concerns
  • Request a structured report framework with specific components and visualizations

4. Advanced Prompt Template:

I am the Chief Risk Officer at a [size/type] financial institution preparing an integrated risk report for our quarterly Board Risk Committee meeting. This report needs to provide a holistic view of our risk profile across multiple domains.

Board Risk Committee profile:
- Composition: [e.g., 5 independent directors with backgrounds in banking, technology, and regulation]
- Risk expertise level: [e.g., sophisticated understanding of financial risks, less technical knowledge of cyber risks]
- Key concerns from previous meetings: [specific issues raised]
- Information preferences: [e.g., visual dashboards, executive summaries, detailed appendices]

Current risk landscape:
- Top enterprise risks: [list of 5-7 priority risks currently being monitored]
- Recent risk events: [internal incidents or external events affecting the industry]
- Risk appetite status: [areas approaching or exceeding thresholds]
- Emerging risk concerns: [newly identified or escalating risks]
- Regulatory focus areas: [current examination themes or regulatory priorities]

Report objectives:
- Provide a comprehensive, integrated view of enterprise risks
- Highlight significant changes in risk profile since last quarter
- Demonstrate effectiveness of risk management activities
- Support informed decision-making on strategic initiatives
- Meet regulatory expectations for board risk reporting

Please help me design a comprehensive integrated risk report by:

1. Outlining an effective report structure:
   - Executive summary approach and key components
   - Logical organization of risk domains
   - Integration points to show risk interconnections
   - Appropriate level of detail for board consumption
   - Supporting materials and appendices

2. For each major risk category, recommend:
   - Key metrics and indicators to include
   - Trend analysis approaches
   - Risk appetite alignment visualization
   - Notable developments to highlight
   - Forward-looking assessments

3. Suggesting effective data visualization approaches:
   - Dashboard design for enterprise risk overview
   - Heat maps or risk matrices for comparative assessment
   - Trend charts for key risk indicators
   - Scenario analysis results presentation
   - Emerging risk visualization techniques

4. Providing communication strategies for:
   - Explaining complex risk concepts to non-technical audience
   - Highlighting areas requiring board attention or action
   - Contextualizing risk information with strategic objectives
   - Addressing potential board questions or concerns
   - Demonstrating proactive risk management

Format your response as a comprehensive integrated risk report framework that balances thoroughness with clarity and actionability for a board audience.

5. Evaluation Criteria:

  • Does the prompt clearly describe the board audience and their information needs?
  • Does it provide context about the current risk landscape and report objectives?
  • Does it request specific report components and visualization approaches?
  • Does it ask for communication strategies tailored to board-level discussions?

6. Practice Activity:

Create your own advanced prompt for integrated risk reporting related to:

  1. A special risk deep-dive on a critical risk area
  2. An annual comprehensive risk assessment for regulatory submission
  3. A risk report for a newly formed board committee with limited risk experience

Exercise 3: Risk-Based Decision Support Prompt Engineering

Objective:

Learn to craft prompts that help develop risk-based analyses to support strategic decision-making.

Background:

Chief Risk Officers must provide risk insights that inform strategic decisions. A key challenge is developing balanced risk analyses that consider both threats and opportunities while supporting business objectives.

Exercise:

1. Scenario:

You need to provide a risk-based analysis to support senior management's decision on a significant strategic initiative (e.g., new product launch, market expansion, acquisition).

2. Basic Prompt Example:

What are the risks of launching this new product?

3. Prompt Improvement Activity:

  • Identify the limitations of the basic prompt
  • Add specificity about the strategic initiative and business objectives
  • Include context about risk appetite and decision criteria
  • Request a structured analysis that balances risks and opportunities

4. Advanced Prompt Template:

I am the Chief Risk Officer at a [size/type] financial institution providing risk-based decision support for [specific strategic initiative: e.g., launching a new digital lending platform, expanding into a new geographic market, acquiring a fintech company].

Strategic initiative details:
- Business objective: [specific goals and expected outcomes]
- Investment required: [approximate cost and resource commitment]
- Timeline: [implementation phases and key milestones]
- Strategic importance: [alignment with broader organizational strategy]
- Key stakeholders: [business units and functions involved]

Decision context:
- Decision deadline: [when final decision must be made]
- Alternative options being considered: [other approaches to achieve similar objectives]
- Key decision criteria: [factors influencing the decision]
- Current executive sentiment: [initial leanings or concerns]
- Similar past initiatives: [relevant historical experience]

Risk considerations:
- Current risk appetite: [relevant risk appetite statements or limits]
- Risk capacity: [ability to absorb additional risk]
- Regulatory considerations: [relevant requirements or constraints]
- Risk management capabilities: [strengths or gaps in managing new risks]
- Risk concentration concerns: [existing concentrations that could be affected]

Please help me develop a comprehensive risk-based decision support analysis by:

1. Providing a structured risk assessment framework:
   - Key risk categories to evaluate for this initiative
   - Risk identification methodology
   - Risk quantification approaches where possible
   - Qualitative assessment criteria for non-quantifiable risks
   - Scenario analysis approach for different outcomes

2. For this specific initiative, analyze:
   - Primary risks and their potential impacts
   - Secondary and tertiary risk effects
   - Potential opportunities and upside scenarios
   - Risk interactions and compounding effects
   - Time-based risk evolution (short, medium, long-term)

3. Recommending risk management strategies:
   - Preventive controls to implement
   - Detective controls to establish
   - Risk transfer options to consider
   - Risk acceptance parameters and governance
   - Contingency plans for adverse scenarios

4. Suggesting a decision support approach:
   - Risk-adjusted return analysis
   - Go/no-go criteria from a risk perspective
   - Phased implementation options to manage risk
   - Key risk indicators to monitor if approved
   - Post-implementation risk review methodology

Format your response as a balanced risk-based decision support analysis that neither advocates for nor against the initiative, but provides objective risk insights to inform sound decision-making.

5. Evaluation Criteria:

  • Does the prompt clearly describe the strategic initiative and business context?
  • Does it articulate the decision parameters and risk considerations?
  • Does it request a balanced analysis of both risks and opportunities?
  • Does it ask for practical risk management strategies and decision support frameworks?

6. Practice Activity:

Create your own advanced prompt for risk-based decision support related to:

  1. A significant technology transformation initiative
  2. A new strategic partnership or joint venture
  3. A major change to business model or product strategy