- Bank failures in 2023 exposed weaknesses in risk governance that ultimately led to bank failures
- The accounting profession must work collaboratively to increase risk awareness, foster new insights, and influence organizational culture and behavior.
- ACCA UK members share their insights and experiences on workplace risk culture
A new special report by ACCA, the world’s leading professional accountancy body, explores the impact of risk culture in the banking industry and how financial institutions can learn from what went wrong to prepare for bank failures in 2023. We are verifying whether it is possible.
report, Risk culture in the banking industry: where next? This sheds new light on the pressing need for the banking sector to adapt and innovate in risk governance and culture. A key finding of this report is that finance and accounting professionals can lead a change in the image of risk culture and see it as something that not only mitigates bad things but also allows many good opportunities to happen. The idea was that it needed to be framed.
The report further suggests that human behavior factors currently do not have enough influence when it comes to risk culture in the banking industry. Understanding the role of human behavior in risk culture is complex, but with effective leadership, policy, and management, many potentially larger operational issues can be mitigated sooner. can.
Rachel Johnson, Head of Risk Management and Corporate Governance at ACCA and author of the report, commented: A strong risk culture supports this and ensures confidence in information for resilience and prudent risk-taking.
“Accounting professionals can act as risk super-networkers, supporting informed decision-making and sharing knowledge. By sharing stories, we can raise risk awareness and generate new insights. This is what an effective risk culture is all about.”
The report speaks to several ACCA members about their experiences working in the banking industry and their attitudes towards understanding compliance and risk. Throughout the discussion, evidence highlighted that a lack of dialogue between banks and regulators is at the root of many problems with building an effective risk culture.
Rather than being reluctant to change the way risk culture is approached or managed, the issue seems to be how to make it successful. The key issues from UK member states talked about in the report were the disconnect between senior decision makers and those looking at operational data, and the lack of understanding among staff on the ground to understand their actions and attitudes. That seems to be one of the things that I do.
ACCA member, a British investment manager, likened the accumulation of operational risk losses at banks to “trying to put out a forest fire”. He commented as follows: “Fine penalties and reputational damage in the banking industry have been significant in recent years. We seem to know that something needs to change in the way we quantify these risks, but as an industry we are not doing enough about it. .”
Another ACCA UK member added: “Time and time again, we see boards and senior management focused on quarterly earnings and not paying enough attention to strategic risks and how quickly they can materialize at very high costs. I am.”
The role of behavioral factors in risk culture is a key takeaway from this report. This book describes the dynamics of risk due to human behavior rather than flaws in mathematical models or process design, and includes 10 action points for banks to improve the relationship between risk, support functions, and accounting functions. highlights how stronger partnerships can make a big difference.
For more information, please visit ACCA’s website.