Banks Failing to Reform Risk Management Practices

Despite the continued fall-out from the financial crisis across the banking industry, it appears that not enough institutions are planning to make fundamental changes to their risk frameworks, according to KPMG.

The results of a new survey show that 90 percent of the 400 banking execs surveyed by the Economist Intelligence Unit on behalf of KPMG have carried out — or plan to carry out — a review of the way they manage risk. Yet only 42 percent of respondents have made — or plan to make — fundamental changes to their risk processes.

This hints at a feeling amongst many banks that the required medicine may not be as severe as some might think — or that the full extent of the fall-out is yet to be realized.

Commenting on the results, Nigel Harman of KPMG Advisory and a partner in the U.K. firm said: “There is little doubt amongst the banks surveyed that a lack of discipline within risk management was a sizable factor behind the credit crisis. However, they seem less forthright in their views on what sort of action this necessitates. What we have is a fairly non-committal response, with just over four out of ten respondents committing their organization to the sort of fundamental changes which a crisis of this magnitude merits.”

The KPMG research highlights several areas in which changes will need to be made — the lack of risk expertise at Board level; communication between the risk function and the rest of the business; and the relative lack of influence exerted by the risk function.

The full survey is available at no charge here.

Comments

[who:]

Despite the financial crisis - why do you assume changes will be made? There is no supervision of the TARP money and looks like the money are used for the banks purposes rather then assisting the economy. Executives are only changing due to public pressure.

Being an ex-anti fraud regional officier for one of the large European insurance company, I know risk management is costs and an obstacle to making deals / trades / business, etc. No body likes rocking the boat! Sweep it under the carpet is the mentality!

Jan 12 01:38 PM