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Risk Culture and Effective Risk Governance

Edited By Patricia Jackson

Overview

Editor Patricia Jackson of EY is the Head of Financial Regulatory Advice for Europe, the Middle East, India and Africa. With over 25 years of experience in the banking and regulation sectors, as well as with the Bank of England, Patricia is uniquely qualified to lead this project on the subject of risk culture and governance.

After the financial crisis, banks and insurance companies were forced to get to grips with the ecosystem that had led to huge, and endemic, losses. Attention on this issue has intensified due to the exposure of high-profile conduct issues such as the LIBOR scandal. Developing and instilling an effective and measurable risk culture has emerged as a key issue for senior management and the board. Boards and regulators must focus on how firms can assess risk culture and achieve the desired philosophy throughout an international organisation.


“The editor, Patricia Jackson, who has wide experience in the risk management field, has brought together an impressive array of authors to look at the nexus of factors which influence risk culture and at ways that an organisation can go about strengthening culture.”


Sir David Walker


Scheduled publication date: 31 Oct 2014

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Book description

Risk culture and safety cultures are a central issue for firms within all industries, with high profile cases of excessive risk taking or the bad behaviour of employees in many different sectors making headlines. In financial services this is one of the factors behind the crisis, but has also surfaced even more damagingly post-crisis in the form of conduct scandals such as LIBOR and various mis-selling cases.

Those controlling firms should be asking themselves how they can develop, instil and measure risk culture. Expectations from investors and, for the appropriate sectors, from regulators, have ratcheted up. With regard to the financial services, the FSB has issued a range of papers emphasising the changes they expect to see. The PRA in the UK has made clear that they expect culture to support the prudent management of all firms and are planning to use new tools to enforce this.

Patricia Jackson has assembled an all-star cast of contributors to examine the different factors which will influence an effective risk culture. There are many different aspects of risk culture which are covered, from an embedded risk appetite, values, and leadership from the top, through to incentives, accountability, and risk transparency, all of which need to come together to ensure a strong culture.

Risk Culture and Effective Risk Governance uses many examples from different industries, such as financial services, transport, oil and gas, and the NHS, to illustrate the various arguments. Patricia has written an introduction which consolidates and clarifies the central themes, examining why risk cultures fail and the lessons to be learnt from different industries regarding a way forward. The regulatory viewpoint for financial services is reflected in four chapters written by senior regulators from different countries.

Chapters include:

  • The Views of the PRA on Risk Culture and Risk Governance in Banks and Insurers (Andrew Bailey and John Sutherland)
  • Creating a Culture of Success: Reducing the Likelihood of Conduct Failures (Brendon Young, ORRF Risk Research Foundation)
  • Risk Culture and Risk Appetite: A Regulatory View (Michael Alix, Federal Reserve, Bank of New York)
  • The Role of Whistleblowing (Carol Sergeant, Danske Bank)
  • Risk Transparency and Risk Culture for Financial Institutions (Sylvie Matherat, Banque de France)

Risk Culture and Effective Risk Governance will empower boards and senior management grappling with risk culture issues who want to create an accountable, quantifiable system for managing and measuring their organisation’s risk culture, and to better understand and challenge the current state of play at their organisations.

Book details

ISBN
9781782720997
Publish date
31 Oct 2014
Format
Paperback
Size
155mm x 235mm

Editor biography

Patricia Jackson

Patricia Jackson is a risk governance expert and advises major financial institutions globally in areas such as risk appetite, risk culture and stress testing.  She is a member of the EY Global Regulatory Network and joined EY, as the partner leading the UK banking risk practice, in 2004. She is based in London but regularly visits the Far East and the US.

Prior to joining EY, Patricia was a senior official at the Bank of England and was the Head of the Financial Industry and Regulation Division. She represented the UK on the Basel Committee for Banking Supervision for 7 years.

Patricia has worked extensively with financial institution boards and is herself the non-executive Deputy Chairman of CHAPS Co, the UK large value payments system, and chairs the Risk Committee. She is also an Adjunct Professor at Imperial College and on the Council of SUERF and a Trustee of the Centre for Economic Policy Research.

Patricia has published a range of papers on risk topics as well as papers on the causes and the responses to the 2007/8 global financial crisis. In 2008 she chaired an international group for the Institute for International Finance on the failures in the securitisation market.

Table of contents

1. Introduction
Patricia Jackson (EY)

2. Risk Culture:  Definitions, Change Practices and Challenges for Chief Risk Officers
Mike Power (London School of Economics), Simon Ashby (Plymouth University) and Tommaso Palermo (London School of Economics)

3. View from the Board
Louise Redmond

4. The Views of the PRA on Risk Culture and Risk Governance in Banks and Insurers
Andrew Bailey and John Sutherland

5. The Investor Perspective on Risk Culture
Peter Montagnon (Institute of Business Ethics)

6. Creating a Culture of Success: Reducing the Likelihood of Conduct Failures
Brendon Young (ORRF Risk Research Foundation)

7. Risk Culture and Risk Appetite: A Regulatory View
Michael Alix (Federal Reserve, Bank of New York)

8. Compensation and Risk: Regulation and Design of Incentive Schemes
Jose Luis López del Olmo (Banco de España)

9. A View from the Remuneration Committee: Emerging Good Practice in the UK
Alan Judes (Strategic Remuneration)

10. Values Driven Performance Measurement
Robert Potter and Miriam Earley (Jardine Lloyd Thompson)

11. The Role of Whistleblowing
Carol Sergeant (Danske Bank)

12. Internal Audit and Risk Culture
Stephen Gregory (EY)

13. Risk Transparency and Risk Culture for Financial Institutions
Sylvie Matherat (Banque de France)

14. The Importance of Risk Data and IT for a Strong Risk Culture
Andrew Cross and Darren Smith (RBS)

Testimonials

"In the wake of the financial crisis, authorities expect the leaders of financial firms to ensure there is an appropriate risk culture to maintain soundness. This means considering capacity and appetite to take risk and addressing the wider factors which affect behaviour of staff and strength of risk management. Patricia Jackson and the contributing authors tackle all these elements making this an important book for boards and senior management."

Svein Andresen, Secretary General, FSB

"Boards need to consider the prevailing culture in an organisation and how risks are managed. This is as true of a large industrial company or utility as it is of a bank. This book draws on a wide range of expertise and perspectives to provide an accessible guide for boards and senior management on how to create effective risk governance and a strong risk culture. I believe all those involved in running companies will find it valuable."

Sir John Parker, Chairman Anglo American plc

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