Overall Net Risk Assessment Criteria

Printed . This content is updated regularly, please refer back to https://bcfsa.ca to ensure that you are relying on the most up-to-date resources.

Select the section you’d like to navigate to.

Go to Definition of Overall Net Risk

Definition of Overall Net Risk

Overall Net Risk (“ONR”) is the aggregate of the net risks for all significant activities within a provincially regulated financial institution (“PRFI”). The aggregation to ONR considers the relative importance of each activity. This assessment recognizes that an activity with low importance but high net risk, may not contribute sufficiently to ONR to affect its rating.

Net risk for each significant activity is a function of the level of inherent risks in the activity offset by the quality of risk management for the activity. Risk management includes operational management as well as applicable oversight functions of the PRFI. These oversight functions include board of directors, senior management, risk management, internal audit, and compliance management.

A PRFI’s ONR is assessed as low, moderate, above average, or high, with the direction of future risk forces assessed as decreasing, stable,or increasing, depending on the PRFI’s circumstances and the business and economic environment.

Low Overall Net Risk	The PRFI has risk management that substantially mitigates risk inherent in its significant activities down to levels that collectively have lower than average probability of an adverse impact to its earnings or capital in the foreseeable future. Normally, PRFIs in this category will have a predominance of significant activities rated as low net risk. Other combinations may be possible depending on the circumstances of the PRFI.
Moderate Overall Net Risk	The PRFI has risk management that sufficiently mitigates risks inherent in its significant activities down to levels that collectively have an average probability of an adverse impact on its earnings or capital in the foreseeable future. Normally, PRFIs in this category will have a predominance of significant activities rated as moderate net risk. Other combinations are possible.
Above Average Overall Net Risk	The PRFI has weaknesses in its risk management that, although not serious enough to present an immediate threat to solvency, give rise to high net risk in several of its significant activities. As a result, net risks in its significant activities collectively have an above average probability of an adverse impact on its earnings or capital in the foreseeable future. Normally, PRFIs in this category will have several of their significant activities rated as above average net risk with most others rated as moderate net risk. Other combinations are possible.
High Overall Net Risk	The PRFI has weaknesses in its risk management that may pose a serious threat to its financial viability or solvency and give rise to high net risk in several its significant activities. As a result, net risks in its significant activities collectively have a high probability of an adverse impact on its earnings or capital in the foreseeable future. Normally, PRFIs in this category will have most significant activities rated as high net risk or will have one or more significant activities that have a pervasive impact on its operations and are therefore rated as high net risk. Other combinations are possible. The weaknesses in risk management lead to considerable doubt about the PRFI’s capability and/or willingness to apply prompt and effective corrective measures to sufficiently mitigate high net risks in its significant activities.