The last global financial crisis has been described as a failure in risk management. Senior executives of some of the biggest global banks involved in making decisions on the risk that their banks were taking did so without really understanding what these risks meant.

In the aftermath of the crisis that brought the global economy to the brink of another great depression, fundamental changes have taken place in bank regulation and supervision that emphasise a more strategic, integrated and coordinated framework for the management of risk in financial institutions.

Banks’ risk-finance relationship leaves much to be desired

Figure 1. Have you achieved your desired level of integration between risk and finance functions?

More than five years on, with the increased focus from regulators and the public at large, the state of risk management in the banking and financial services industry has improved, though perhaps not as significantly as one would have expected.

In a recent survey conducted by The Asian Banker among risk managers and practitioners on the state of risk and finance function integration in their organisations, only a little over 1/3 of the respondents believe that they have achieved their desired level of integration between risk and finance functions, while 62% do not. The level of integration is estimated to be lower in this part of the world.

While there has been pressure from regulators to adopt a more strategic and coordinated risk management framework, many organisations have still not truly embraced the cultural and mind-set change required to transform their attitude towards a more holistic risk management framework, holding instead to a more compartmentalised and fragmented approach. Different risks are still assigned to specialised departments with financial and risk reporting separa...

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Operational Risk, Regulation, Risk and Regulation

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Operational Risk,Regulation,Risk and Regulation,

Keywords:ADCB, Bank Mandiri, CIMB, DBS, OCBC