Risk culture in banks

This book explores the risk culture in banks after the financial crisis. It covers how to assess and measure the risk culture as well as analyze the impact on performance and reputation. It explores the impact of regulation and a range of tools that can be adopted from the board of directors to promote a healthy risk culture in the governance of internally controlled financial institutions and risk culture in banks.

Risk Culture in Banking

Alessandro Carretta, Franco Fiordelisi, Paola Schwizer

Palgrave Macmillan

2017

Abstract

This book explores the risk culture in banks after the financial crisis. It analyzes the role that country and institutional risk cultures, market competitiveness, organizational systems and institutional practices have played in the weakening of risk cultures in financial institutions. lead to a financial crisis. It covers how to assess and measure the risk culture as well as analyze the impact on performance and reputation. Finally, it explores the impact of regulation and a range of tools that can be adopted from the board of directors to promote a healthy risk culture in the governance of internally controlled financial institutions and risk culture in banks.

The Financial Crisis of 2007-09 showed that an inappropriate risk culture as well as deficiencies in risk management played an important role in bank failures. To establish a "good" risk culture has become an object of focus for regulators. They are focusing on the bank's standards, attitudes and behaviors, associated with risk taking and risk perception. There is no ideal as to how banks should manage risk, but it is clear that there is a need to improve risk monitoring across the enterprise, strengthening the role of risk directors in corporate governance. An effective risk culture contributes to a bank's ability to react to changes in risk.

Because taking risks is part of a bank's business, it is still possible that, even a small risk, some undesirable results will occur. Good risk management will help avoid unexpected and unpredictable developments. An appropriate risk management framework should be tailored to the bank's optimal risk profile and business strategy. Changing the risk culture in a bank is not an easy task, because it requires more than just improvements in risk measurement, governance and communication.

Behavioral aspects also need to be taken into account. There is a need to revisit the cycle of setting risk levels in line with business strategy, taking risks in line with value growth opportunities, and communicating timely, transparent and honest risks. Risk management should have a higher weight in the decision-making process. This book provides an explanatory framework for establishing the right level of risk and discusses the responsibilities and boundaries of risk management in light of the new regulatory environment. It shows that risk management is closely related to governance structure and business model.

The contents of the book include:

General View: Theory & Tools

Good Practice, Experience, Field Studies & Empirical

Citation

Alessandro Carretta, Franco Fiordelisi, Paola Schwizer,Risk Culture in Banking, Palgrave Macmillan,2017

Collection

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