Exercise 1: Risk Identification and Assessment Prompt Engineering
Objective:
Learn to craft effective prompts for comprehensive risk identification and assessment across multiple risk categories.
Background:
Risk Officers are responsible for identifying, assessing, and monitoring risks that could impact the organization. A key challenge is developing a comprehensive view of risks across multiple domains and ensuring thorough assessment.
Exercise:
1. Scenario:
You need to conduct a comprehensive risk assessment for a new digital banking initiative that includes mobile payments, account opening, and loan application features.
2. Basic Prompt Example:
What are the risks of implementing a digital banking platform?3. Prompt Improvement Activity:
- Identify the limitations of the basic prompt
- Add specific details about the digital banking initiative
- Include context about your organization's risk framework
- Request structured analysis across multiple risk categories
- Ask for assessment methodology and criteria
4. Advanced Prompt Template:
I am a Risk Officer at a [size] financial institution conducting a comprehensive risk assessment for a new digital banking initiative with the following components:
- Mobile payment functionality (P2P, bill pay, mobile check deposit)
- Digital account opening with ID verification
- Online loan application and approval process
- Integration with our core banking system
- Third-party vendor partnerships for specific features
Our risk assessment framework includes these categories:
- Operational risk
- Technology risk
- Compliance/regulatory risk
- Strategic risk
- Credit risk
- Reputation risk
- Third-party risk
Please help me develop a comprehensive risk assessment by:
1. Identifying specific risks in each category for this digital banking initiative, considering:
- Our regulatory environment (subject to [relevant regulations])
- Customer demographics (primarily [describe customer base])
- Competitive landscape (several competitors already offer similar services)
- Our current technology infrastructure (describe key limitations)
2. For each identified risk:
- Provide a clear risk statement
- Suggest appropriate assessment criteria (likelihood, impact, velocity)
- Identify potential risk triggers or scenarios
- Recommend key risk indicators to monitor
- Suggest potential controls or mitigations
3. Recommend a methodology for:
- Prioritizing these risks
- Quantifying impact where possible
- Assessing control effectiveness
- Determining residual risk levels
- Establishing risk acceptance criteria
4. Suggest a structured approach for documenting and reporting these risks to:
- Senior management
- Board risk committee
- Regulatory examiners
Format your response as a structured risk assessment framework that I can use to conduct a thorough analysis of our digital banking initiative.5. Evaluation Criteria:
- Does the prompt clearly describe the digital banking initiative?
- Does it provide context about the organization's risk framework?
- Does it request specific risks across multiple categories?
- Does it ask for assessment methodology and documentation approach?
6. Practice Activity:
Create your own advanced prompt for risk identification and assessment related to:
- A new commercial lending product
- A cloud migration initiative
- A branch expansion into a new geographic market
Exercise 2: Risk Monitoring and Reporting Prompt Engineering
Objective:
Develop skills to craft prompts that help create effective risk monitoring frameworks and reporting dashboards.
Background:
Risk Officers must establish monitoring systems to track key risks and report changes to stakeholders. A key challenge is designing effective monitoring frameworks and creating clear, actionable risk reports.
Exercise:
1. Scenario:
You need to develop a risk monitoring framework and reporting dashboard for your institution's commercial real estate portfolio.
2. Basic Prompt Example:
What metrics should we track for commercial real estate risk?3. Prompt Improvement Activity:
- Identify the limitations of the basic prompt
- Add details about your commercial real estate portfolio
- Include context about current economic conditions
- Request a structured monitoring framework with specific metrics
- Ask for reporting dashboard design recommendations
4. Advanced Prompt Template:
I am a Risk Officer at a [size] financial institution developing a comprehensive risk monitoring framework and reporting dashboard for our commercial real estate (CRE) portfolio with these characteristics:
- Portfolio size: $[X] billion
- Property types: [list major segments and percentages]
- Geographic concentration: [list major markets and percentages]
- Current performance metrics: [delinquency rate, LTV ratios, etc.]
- Growth trajectory: [e.g., growing X% annually]
Current economic and market conditions:
- Interest rate environment: [describe current rates and trends]
- Regional economic indicators: [employment, growth in key markets]
- CRE market trends: [vacancy rates, cap rates, construction activity]
- Regulatory focus: [current regulatory concerns about CRE]
Stakeholder reporting requirements:
- Board Risk Committee: quarterly strategic overview
- Senior Management: monthly detailed review
- Lending teams: weekly performance metrics
- Regulators: quarterly concentration reports
Please help me develop a comprehensive CRE risk monitoring framework and reporting dashboard by:
1. Recommending key risk indicators (KRIs) to monitor, including:
- Leading indicators that provide early warning signals
- Lagging indicators that confirm risk materialization
- External market indicators to track
- Internal portfolio metrics to measure
- Concentration metrics by property type, geography, borrower
2. For each recommended KRI:
- Provide a clear definition and calculation methodology
- Suggest appropriate thresholds or trigger levels
- Recommend monitoring frequency
- Explain its significance and what it indicates
- Identify data sources required
3. Design a multi-level reporting approach with:
- Executive dashboard components and layout
- Drill-down capabilities and hierarchy
- Visual representation recommendations (charts, heat maps, etc.)
- Trend analysis presentation
- Exception reporting methodology
4. Suggest a framework for:
- Escalation procedures when thresholds are breached
- Action planning based on monitoring results
- Periodic review and refinement of the framework
- Integration with stress testing and scenario analysis
- Correlation analysis between different indicators
Format your response as a structured CRE risk monitoring framework and dashboard design that balances comprehensiveness with clarity and actionability.5. Evaluation Criteria:
- Does the prompt clearly describe the CRE portfolio and economic context?
- Does it specify the different stakeholder reporting needs?
- Does it request specific KRIs with definitions and thresholds?
- Does it ask for dashboard design and escalation procedures?
6. Practice Activity:
Create your own advanced prompt for risk monitoring and reporting related to:
- Cybersecurity risk
- Liquidity risk
- Operational risk in a specific business line
Exercise 3: Risk Mitigation Strategy Prompt Engineering
Objective:
Learn to craft prompts that help develop effective risk mitigation strategies for identified risks.
Background:
Risk Officers must develop strategies to mitigate identified risks. A key challenge is designing effective, practical mitigation approaches that balance risk reduction with business objectives.
Exercise:
1. Scenario:
You've identified significant vendor concentration risk with a critical technology provider and need to develop a comprehensive mitigation strategy.
2. Basic Prompt Example:
How can we reduce vendor concentration risk?3. Prompt Improvement Activity:
- Identify the limitations of the basic prompt
- Add specific details about the vendor relationship
- Include context about your organization's constraints
- Request a structured mitigation strategy with specific actions
- Ask for implementation considerations and timeline
4. Advanced Prompt Template:
I am a Risk Officer at a [size] financial institution developing a comprehensive mitigation strategy for vendor concentration risk with a critical technology provider:
Vendor relationship details:
- Service provided: [core banking platform, payment processing, etc.]
- Relationship tenure: [X years]
- Contract terms: [renewal date, termination provisions]
- Criticality: [high/medium/low, % of operations impacted]
- Current risk assessment: [high concentration risk due to limited alternatives]
- Recent incidents: [any service disruptions, security issues, etc.]
Organizational constraints:
- Budget limitations: [available budget for mitigation]
- Technical capabilities: [internal expertise limitations]
- Regulatory requirements: [relevant vendor management regulations]
- Business continuity requirements: [RTO/RPO objectives]
- Change management capacity: [ability to implement significant changes]
Current mitigation measures:
- [List any existing controls or mitigation strategies]
- [Their effectiveness and limitations]
Please help me develop a comprehensive vendor concentration risk mitigation strategy by:
1. Recommending a structured approach to:
- Assess the full scope and impact of the concentration risk
- Quantify potential financial and operational impacts
- Identify critical dependencies and single points of failure
- Evaluate available alternatives in the marketplace
- Determine optimal risk reduction targets
2. Suggesting specific mitigation tactics across these categories:
- Contractual protections and SLA enhancements
- Redundancy and backup solutions
- Internal capability development
- Alternative vendor identification and onboarding
- Operational workarounds and manual processes
- Insurance and financial protections
3. For each recommended tactic:
- Provide implementation steps and requirements
- Estimate effectiveness in reducing concentration risk
- Identify potential challenges or limitations
- Suggest success metrics and monitoring approach
- Outline resource requirements and costs
4. Develop an implementation roadmap with:
- Prioritization framework for mitigation actions
- Short-term (0-6 months) action items
- Medium-term (6-18 months) initiatives
- Long-term (18+ months) strategic changes
- Critical dependencies between actions
- Key milestones and decision points
Format your response as a comprehensive vendor concentration risk mitigation strategy that balances risk reduction with practical implementation considerations.5. Evaluation Criteria:
- Does the prompt clearly describe the vendor relationship and risk context?
- Does it specify organizational constraints and current measures?
- Does it request specific mitigation tactics across multiple categories?
- Does it ask for implementation steps, timelines, and success metrics?
6. Practice Activity:
Create your own advanced prompt for risk mitigation strategy development related to:
- Credit concentration in a specific industry
- Business continuity risk for a critical process
- Compliance risk with a new regulation