Exercise 1: Risk Governance Prompt Engineering

Objective:

Learn to craft effective prompts for developing and enhancing risk governance frameworks and policies.

Background:

Risk Managers are responsible for establishing and maintaining effective risk governance structures. A key challenge is designing frameworks that balance oversight with operational efficiency.

Exercise:

1. Scenario:

You need to develop or enhance your institution's risk governance framework to address evolving regulatory expectations and business needs.

2. Basic Prompt Example:

What should be included in a risk governance framework?

3. Prompt Improvement Activity:

  • Identify the limitations of the basic prompt
  • Add specific details about your institution's structure
  • Include context about regulatory expectations
  • Request structured governance components
  • Ask for implementation and effectiveness measurement approaches

4. Advanced Prompt Template:

I am a Risk Manager at a [size] financial institution developing/enhancing our risk governance framework with these characteristics:

Organizational context:
- Institution type: [bank, credit union, insurance, etc.]
- Size and complexity: [assets, employees, business lines]
- Geographic footprint: [regions, jurisdictions]
- Current governance structure: [board committees, management committees]
- Three lines of defense model implementation status
- Recent governance challenges or incidents

Regulatory context:
- Primary regulators: [Fed, OCC, FDIC, state, international]
- Recent examination findings: [any governance-related issues]
- Regulatory guidance: [specific risk governance expectations]
- Industry trends: [emerging governance practices]
- Peer benchmarking: [how similar institutions structure governance]

Development objectives:
- Address specific regulatory expectations
- Enhance risk oversight effectiveness
- Clarify roles and responsibilities
- Improve risk information flow
- Balance governance with operational efficiency
- Establish clear escalation mechanisms

Please help me develop a comprehensive risk governance framework by:

1. Outlining a structured governance architecture that includes:
   - Board and committee structure recommendations
   - Management committee framework
   - Three lines of defense implementation approach
   - Roles and responsibilities delineation
   - Escalation and reporting lines
   - Integration with enterprise risk management

2. For each governance component, provide:
   - Detailed description and purpose
   - Key responsibilities and authorities
   - Membership and expertise requirements
   - Meeting frequency and agenda structure
   - Information requirements and reporting
   - Decision-making processes
   - Documentation standards

3. Recommending policy and charter development for:
   - Board risk committee charter
   - Management risk committee charters
   - Risk appetite statement framework
   - Enterprise risk management policy
   - Risk assessment methodology
   - Issue management and escalation policy
   - New product/initiative approval process

4. Suggesting approaches for:
   - Implementation and change management
   - Governance effectiveness assessment
   - Regulatory compliance documentation
   - Ongoing governance maintenance
   - Training and awareness programs
   - Continuous improvement mechanisms

Format your response as a comprehensive risk governance framework that balances regulatory compliance with practical operational considerations.

5. Evaluation Criteria:

  • Does the prompt clearly describe the organizational and regulatory context?
  • Does it provide specific development objectives?
  • Does it request a structured governance architecture with detailed components?
  • Does it ask for policy and charter development recommendations?
  • Does it consider implementation and effectiveness measurement?

6. Practice Activity:

Create your own advanced prompt for risk governance related to:

  1. A newly formed digital bank
  2. A financial institution expanding internationally
  3. A merger integration scenario

Exercise 2: Risk Strategy Prompt Engineering

Objective:

Develop skills to craft prompts that help formulate effective risk strategies aligned with business objectives.

Background:

Risk Managers must develop risk strategies that support business goals while maintaining appropriate risk controls. A key challenge is balancing risk-taking with risk mitigation in a way that creates sustainable value.

Exercise:

1. Scenario:

You need to develop a comprehensive risk strategy for a new business initiative (e.g., digital transformation, new product line, market expansion).

2. Basic Prompt Example:

What risks should we consider for our digital transformation?

3. Prompt Improvement Activity:

  • Identify the limitations of the basic prompt
  • Add specific details about the business initiative
  • Include context about risk appetite and constraints
  • Request a structured risk strategy approach
  • Ask for implementation and monitoring recommendations

4. Advanced Prompt Template:

I am a Risk Manager at a [size] financial institution developing a comprehensive risk strategy for our [specific business initiative] with these characteristics:

Initiative details:
- Description: [digital transformation, new product line, market expansion]
- Strategic objectives: [growth targets, efficiency goals, competitive positioning]
- Timeline: [implementation phases, key milestones]
- Investment: [budget, resource allocation]
- Key stakeholders: [business lines, technology, operations]
- Current status: [planning phase, early implementation]

Risk context:
- Institutional risk appetite: [relevant statements or thresholds]
- Current risk profile: [major risk exposures, capacity constraints]
- Regulatory considerations: [compliance requirements, expectations]
- Risk management capabilities: [tools, expertise, processes]
- Previous experience: [similar initiatives, lessons learned]
- External environment: [competitive landscape, economic conditions]

Please help me develop a comprehensive risk strategy by:

1. Recommending a structured approach to:
   - Identify and assess risks across categories (strategic, operational, financial, compliance)
   - Align risk-taking with strategic objectives
   - Establish appropriate risk guardrails and boundaries
   - Develop risk acceptance criteria
   - Create a risk governance model for the initiative
   - Design risk monitoring and reporting mechanisms

2. For each major risk category, provide:
   - Key risks to consider
   - Risk assessment methodology
   - Potential mitigation strategies
   - Control design considerations
   - Early warning indicators
   - Contingency planning approaches

3. Suggesting implementation strategies for:
   - Risk appetite calibration for the initiative
   - Risk-based decision frameworks
   - Stage-gate risk assessment processes
   - Risk ownership and accountability
   - Risk reporting and escalation
   - Risk culture and awareness

4. Recommending approaches for:
   - Integrating risk considerations into business planning
   - Balancing risk control with business agility
   - Measuring risk-adjusted performance
   - Adapting the risk strategy as the initiative evolves
   - Capturing lessons learned and continuous improvement
   - Communicating the risk strategy to stakeholders

Format your response as a comprehensive risk strategy that balances enabling business objectives with appropriate risk management.

5. Evaluation Criteria:

  • Does the prompt clearly describe the business initiative and risk context?
  • Does it request a structured approach to risk strategy development?
  • Does it ask for specific strategies for different risk categories?
  • Does it consider implementation and monitoring approaches?
  • Does it balance business enablement with risk management?

6. Practice Activity:

Create your own advanced prompt for risk strategy development related to:

  1. A fintech partnership or acquisition
  2. A core banking system replacement
  3. A new lending product for an underserved market

Exercise 3: Risk Communication Prompt Engineering

Objective:

Learn to craft prompts that help develop effective risk communication strategies for different stakeholders.

Background:

Risk Managers must communicate complex risk information to various stakeholders. A key challenge is tailoring risk messages to different audiences while maintaining accuracy and driving appropriate action.

Exercise:

1. Scenario:

You need to develop a comprehensive risk communication strategy to effectively inform and engage different stakeholders about key risks and mitigation efforts.

2. Basic Prompt Example:

How should I communicate risk information to stakeholders?

3. Prompt Improvement Activity:

  • Identify the limitations of the basic prompt
  • Add specific details about stakeholder groups
  • Include context about risk information needs
  • Request structured communication approaches
  • Ask for message framing and delivery recommendations

4. Advanced Prompt Template:

I am a Risk Manager at a [size] financial institution developing a comprehensive risk communication strategy to effectively inform and engage different stakeholders.

Stakeholder profiles:
1. Board of Directors:
   - Risk expertise: [sophisticated, limited]
   - Information needs: [strategic oversight, governance]
   - Decision authority: [risk appetite, policy approval]
   - Meeting frequency: [quarterly, monthly]
   - Current challenges: [information overload, technical complexity]

2. Executive Management:
   - Risk expertise: [varies by role]
   - Information needs: [strategic decisions, resource allocation]
   - Decision authority: [implementation, prioritization]
   - Meeting frequency: [weekly, monthly]
   - Current challenges: [competing priorities, time constraints]

3. Business Line Leaders:
   - Risk expertise: [business-specific knowledge]
   - Information needs: [operational impact, performance context]
   - Decision authority: [tactical implementation, controls]
   - Meeting frequency: [regular business reviews]
   - Current challenges: [risk-reward balance, accountability]

4. Regulators:
   - Risk expertise: [specialized, framework-oriented]
   - Information needs: [compliance, governance effectiveness]
   - Decision authority: [examination findings, enforcement]
   - Meeting frequency: [examinations, ongoing supervision]
   - Current challenges: [demonstrating effectiveness, documentation]

Risk information context:
- Key risk categories: [credit, market, operational, compliance, etc.]
- Risk assessment outputs: [heat maps, metrics, scenarios]
- Risk appetite framework: [statements, limits, thresholds]
- Issue management: [findings, remediation status]
- Emerging risks: [new threats, changing landscape]

Please help me develop a comprehensive risk communication strategy by:

1. Recommending overall communication principles and framework:
   - Communication objectives and success criteria
   - Message consistency and alignment approach
   - Balancing transparency with confidentiality
   - Frequency and timing considerations
   - Feedback mechanisms and continuous improvement
   - Crisis communication integration

2. For each stakeholder group, suggest:
   - Key message content and priorities
   - Appropriate level of detail and technical language
   - Effective presentation formats and visualizations
   - Supporting materials and documentation
   - Delivery channels and methods
   - Engagement and discussion techniques

3. For different risk information types, recommend:
   - Effective framing approaches
   - Visualization and presentation techniques
   - Contextual information to include
   - Action-oriented messaging strategies
   - Common pitfalls and how to avoid them
   - Examples and analogies that resonate

4. Suggesting implementation approaches for:
   - Regular risk reporting cadence
   - Ad-hoc and escalation communications
   - Risk culture and awareness building
   - Training and education components
   - Measuring communication effectiveness
   - Adapting to changing stakeholder needs

Format your response as a comprehensive risk communication strategy that effectively informs and engages different stakeholders while driving appropriate risk actions.

5. Evaluation Criteria:

  • Does the prompt clearly describe the stakeholder profiles and their needs?
  • Does it provide context about risk information types?
  • Does it request overall communication principles and stakeholder-specific approaches?
  • Does it ask for recommendations for different risk information types?
  • Does it consider implementation and effectiveness measurement?

6. Practice Activity:

Create your own advanced prompt for risk communication related to:

  1. Communicating a significant risk event or incident
  2. Explaining a complex model risk to non-technical stakeholders
  3. Building risk awareness across the organization