Introduction: Understanding Risk Culture and What To Do About It
Risk Culture: Definitions, Change Practices and Challenges for Chief Risk Officers
Risk Culture: A View from the Board
The Views of the PRA on Risk Culture and Risk Governance in Banks and Insurers
Risk Appetite and Risk Culture: A Regulatory View
The Investor Perspective on Risk Culture
Values-driven Performance Management
Creating a Culture of Success: Reducing the Likelihood of Conduct Failures
Internal Audit and Risk Culture
Compensation and Risk: Regulation and Design of Incentive Schemes
A View from the Remuneration Committee: Emerging Good Practice in the UK
Risk Transparency and Risk Culture for Financial Institutions
The Importance of Data and IT for a Strong Risk Culture
The Role of Whistleblowing in Risk Culture and Effective Governance
To support effective risk governance and a strong risk culture, good information on the amount of risk being taken is essential. Without good data and supporting IT, risk transparency would not be sufficient to enable senior management to manage risk effectively and react appropriately to risk-taking behaviour. It will also mean that incentives are not adjusted properly. However, this is also a two-way street; in cultures where risk is not given much weight, the pressure for internal transparency of risks is also less.
The 2007–08 financial crisis highlighted serious shortcomings and variations in capabilities across the banking industry.
One of the most significant lessons learned from the global financial crisis that began in 2007 was that banks’ information technology (IT) and data architectures were inadequate to support the broad management of financial risks. Many banks lacked the ability to aggregate risk exposures and identify concentrations quickly and accurately at the bank group level, across business lines and between legal entities. Some banks were unable to manage their risks properly because of weak risk data aggregation capabilities and risk reporting practices.