Optimisation of compensation systems and incentive schemes
Optimising the remuneration system in a credit institution aims to enhance employee efficiency, encourage diligent performance of duties, and motivate employees to make decisions that uphold the organisation’s established risk profile.
FBK assists credit institutions in building a risk-oriented remuneration system, integrating best market practices and regulatory requirements, including improvements to deferred bonus mechanisms for risk-taking employees in accordance with Bank of Russia Instruction No. 154-I “On the Procedure for Assessing Credit Institution Remuneration System and Issuing Orders to the Credit Institution to Correct Deficiencies in the Remuneration System” dated 17 June 2014.
The remuneration system optimisation includes:
- GAP analysis of the credit institution’s remuneration system to assess compliance with principles and approaches under Bank of Russia Instruction No. 154-I dated 17 June 2014, the nature and scale of operations, the risks assumed, corporate norms and approaches.
- Evaluation of the completeness and adequacy of the list of risk-taking employees, including criteria for their identification.
- Development of deferred bonus mechanisms and metrics for adjusting variable compensation for risk-takers.
- Revision of bonus approaches for internal control and risk management departments.
- Design of quantitative and qualitative KPIs for adjusting variable compensation across all levels.
- Creation of a methodology to assess the effectiveness of the remuneration system’s design and implementation.
Upon completion of the optimisation of compensation systems and incentive schemes, the client receives:
- Report with recommendations to enhance methodological approaches to:
- structuring the remuneration system;
- implementing a risk-oriented reward framework;
- developing and integrating KPIs;
- rewarding executives and risk-taking employees;
- compensating key personnel;
- incentivising specific business lines and departments;
- refining specific internal documentation related to the remuneration system.
- Minimised risk of downgrading the Bank of Russia’s assessment of the personnel financial incentive risk management indicator (PU7) under Ordinance No. 4336-U “On Assessing Banks’ Economic Situation” dated 3 April 2017.
- Compliance of the remuneration system with Bank of Russia Instruction No. 154-I.
- Timely identification of regulatory (compliance) risks linked to non-compliance with Bank of Russia requirements.
- Reduced losses from personnel management process errors.
- Integration of best practices from the Russian banking sector.
Our advantages
Experience
Over the past 5 years, FBK experts have successfully completed 50+ projects to assess and optimise remuneration systems for credit institutions, many of which are recurring clients.
Expert Team
FBK specialists monitor legislative changes, ensuring our consultations are always grounded in latest regulatory requirements, while our recommendations are crafted to incorporate best domestic and global practices.
Individual Approach
FBK develops a personalised solution for each credit institution, taking into account the nature and scale of operations, organisational structure, risk and capital management strategies.
Key Persons
