A lack of stature and resources for risk management are cited as leading contributors to the credit crisis, according to interviews with almost 500 global bank executives conducted by the Economist Intelligence Unit on behalf of KPMG.
More than three-quarters (76%) of the executives surveyed report that risk management is still stigmatised as a support function at their bank, while 45% say their board lacks risk expertise. Furthermore, 64% of respondents believe that their chief risk officer needs to hold greater influence over strategy development.
Michael Conover, a principal in the financial risk management practice at KPMG comments. "Financial models don't prevent poor risk decisions, people do. To restore confidence in bank's risk management policies, banks should start by changing the risk culture, which includes giving risk management a seat at the table when critical decisions are being made, educating senior management and boards on risk management best practices, and setting the right 'tone at the top'."
When asked to rank the leading contributors to the credit crisis, the banking executives named incentives and remuneration (54%), followed closely by lack of risk governance (50%) and risk culture (48%).
Eighty five per cent of respondents say that they have already reviewed, or are in the process of reviewing, their risk management procedures, with another seven per cent saying that they are planning to undertake a review. Yet only 42% of respondents have made - or plan to make - fundamental changes to their risk processes.
Reporting and measuring of risk (78%), risk governance (77%t) and risk culture (77%) are cited as the investment priorities for banks over the coming year. The survey also found that 78% of respondents want to improve the way risk is measured and reported, to help improve the accuracy of forecasts.
Finextra is hosting an important one-day conference and exhibition exploring new directions in bank risk management at the Brewery in London on 5 February. See Finexpo - Risk and Transaction Management for full details and registration.