Risk Governance and the Board: Actions to Ensure a Tight Reign on Post-Crisis Business and IT Priorities

by Cubillas Ding, September 29, 2009
Industry Trends
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

A bank's performance during the crisis can be predicted by the degree to which its board engages with risk management. Resilient banks show much higher levels of board engagement, and have survived the crisis period without significant government intervention.

In the current climate, where there are calls from political, regulatory, and investor circles for fundamental reforms to risk, compliance, and governance practices, the stakes for financial firms have never been higher. A report, Risk Governance and the Board: Actions to Ensure a Tight Reign on Post-Crisis Business and IT Priorities, highlights risk governance best practices and provides a checklist of items that boards and senior managers need to take action on in order to get things right.

"Risk governance is so fundamental to the well-being of financial institutions that they should have every reason to invest serious effort in getting it right," says Cubillas Ding, senior analyst with Celent's Securities & Investments Group and author of the report. "Every firm would like to think of their risk management function as independent from the business. This is a rudimentary principle that is often 'true on paper' but not necessarily reflected in the realities that actually shape the behaviour of risk managers."

In this point of view report, Celent discusses seven best practice elements. Some are to be found among the recommendations in industry corporate governance studies and reports; others are not. The ideal structures and processes for risk governance vary from one institution to another, but certain elements of best practices are common to all. Boards and senior managers would do well to take heed and act sooner rather than later.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Risk Governance and Failures in Risk Management

Best Practice: Strengthening the Seven Pillars of Highly Effective Risk Governance

Looking Forward

Leveraging Celent’s Expertise

Related Celent Research

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