The new model of governance and risk management for financial institutions

John Bugalla, James Kallman, Steve Lindo and Kristina Narvaez

Journal of Risk Management in Financial Institutions, 2012, vol. 5, issue 2, 181-193

Abstract: The paper proposes a new model of governance and risk management consisting of four components: (i) board risk oversight responsibilities, (ii) a board level risk committee, (iii) an executive risk committee and (iv) an individual with responsibility for overall risk management. Some companies are subject to the Dodd–Frank Act and are forming a stand-alone risk committee; other companies still have the option of adopting these best practices. The paper contends that the new model promotes greater risk disclosure, the audit committee should complement the risk management committee, the board level risk committee should have an independent member with extensive risk management experience, the board should develop a clear risk position, management should form an executive risk committee, have a chief risk officer, create an internal risk intelligence function and, if these are done, institutions will enjoy higher stock prices.

Keywords: risk management; Dodd–Frank; disclosure; responsibility; risk committee; risk position; chief risk officer (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2012:v:5:i:2:p:181-193

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