Towards a 3-D model of risk management: Why is the current focus on culture, conduct and senior management having so little impact?

Gary J. Storer

Journal of Risk Management in Financial Institutions, 2016, vol. 9, issue 4, 363-372

Abstract: Since 2008, regulators and risk professionals have recognised that culture and senior manager behaviour are critical drivers of fair treatment of customers and effective risk management. However, despite this recognition, cultures are slow to change, and regulatory and risk management failures at financial institutions continue. This paper argues that the paradigms adopted by regulators and risk professionals in addressing culture are flawed and that the rationalist, pseudo-scientific approach that underlies most risk management cannot control these fluid, sometimes chaotic and always complex factors. We identify some key indicators of effective cultures and highlight the challenges to risk departments, which must become expert in assessing organisational learning, management decision making and future thinking.

Keywords: risk management; culture; conduct; regulation; banking; finance (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:aza:rmfi00:y:2016:v:9:i:4:p:363-372

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