“Risk is everyone’s responsibility, whether you’re a teller, a relationship manager, in operations or in IT, risk is your responsibility. It’s not just the risk team.”
Banks and financial services firms have made progress creating consistent and unified risk cultures and increasing their risk appetites to align with business objectives.
Survey respondents, especially those from companies hit hardest by the financial crisis, confirm risk culture and risk appetite are two critical areas of focus for senior management teams. Overall, 41% of firms report their risk culture is strong, however only 25% of severely impacted firms believe they are close to achieving a strong risk culture.
Similarly, while interest and commitment is high for risk appetite approaches, most feel it remains a work in progress.
The majority report they are making progress toward achieving a strong risk culture
Top challenges include inadequate systems and data for reporting and measuring results, staff training and motivating a behavior change, aligning group risk parameters with different entities/countries, and uncharted standards for implementing a risk appetite process.
Recommendations for strengthening risk culture and risk appetite include:
- Start at the top
- Strengthen risk roles and responsibilities
- Clarify risk appetite definition and metrics
- Connect risk culture and appetite to business planning and wider organization initiatives
- Reinforce culture with communication and training
- Emphasis accountability
- Monitor, measure and review risk culture and appetite benchmarks
Only 37% say that risk appetite is incorporated into day-to-day business unit management decision making
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