Adita Farahiyah supported the implementation of Key's Environmental and Social Risk Management Policy by recommending Key Risk Indicators and developing a list of high-risk industries pertinent to environmental and social risks.
Goals
KeyBank ("Key") established an Environmental and Social Risk Management (ESRM) Policy in August 2023 with the purpose of outlining its high-level approach to managing environmental and social risks and mitigating the impact of these risks on its business, employees, clients, portfolio, and operations. However, Key has not yet established key risk indicators and high-risk industries that would lead Key to exercise greater caution. Therefore, Adita Farahiyah assisted Key in operationalizing the policy in various capacities.
Solutions
Adita contributed to the ESRM Policy operationalization in four areas:
-Propose potential key risk indicators (KRI) for environmental and social risk categories. Adita reviewed Key's materiality information to determine KRIs to be displayed on the dashboard.
-Build an E&S KRI dashboard mockup that displays key information: the selected KRIs; risk mitigations; calculation, changes, and trends; and control performance.
-Develop a list of high-risk industries. Adita benchmarked industries restricted by similar banks and calculated Key's financial commitments across industries. Adita used this information to select industries that pose high risks to Key.
-Update the ESRM Policy with regard to the 2024 review cycle. Adita added some associated policies and suggested some changes to the terms and definitions in the policy.
Potential Impact
Having environmental and social key risk indicators allows Key to implement targeted risk mitigation strategies, make informed decisions that align with Key's sustainability goals, and build resilience to environmental and social challenges. Key risk indicator dashboards provide Key with early warning signals and trend analysis, helping to anticipate emerging risks and take corrective actions before they become significant problems. Additionally, identifying high-risk industries helps Key develop strategies to prevent or minimize potential liabilities and reputational damage.