Dear CRO: behavioural risk management is the new thing for you

Wieke Scholten and Alexandra Chesterfield

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Behavioural risk management (BRM) helps to better prevent risk events that can hurt financial services firms, their customers, shareholders and society. Underpinned by methods and insights from across the behavioural sciences (such as organisational and social psychology, decision making and cognitive science, etc), this forward-looking risk management approach is increasingly encouraged by regulators and invested in by financial institutions globally. This paper provides a practical three-step approach to manage behavioural risk, illustrated with financial services case studies. Future developments are then discussed. The paper closes with common implicit beliefs that may hinder senior risk management professionals initiating BRM in their organisations and a manifesto for action to help get started.

Keywords: audit; behavioural risk; behavioural science; culture; ethics; financial services; risk management; AAM requested (search for similar items in EconPapers)
JEL-codes: G32 J50 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2024-10-01
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Published in Journal of Risk Management in Financial Institutions, 1, October, 2024, 17(4), pp. 383 - 394. ISSN: 1752-8887

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:126004

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