Corporate Governance and Risk Management in Financial Institutions by Robert C. Gericke

Author:Robert C. Gericke
Language: eng
Format: epub, pdf
Publisher: Springer International Publishing, Cham

The intense analysis of business processes leads not only to the identification of lacks of control, but—beyond that—shows required action, including the attribution of missing responsibilities or a clear definition of governance functions, once more stressing the point that transparency is a major element of good corporate governance.

2.2.12.3 Increased Effectiveness and Efficiency

The implementation of an ICS exposes existing control mechanisms and tests them with relation to their relevance and extent. This allows the exclusion of both excessive and insufficiently controlled processes which can be remedied while streamlining may occur by dropping unnecessary and repetitive controls.

In summary, ICS—just as labor law induced risk management or other legally prescribed measures to deal with risks—can be used beyond the mere compliance with obligations to improve the overall performance and risk profile of an organization.

Apart from those areas, there are many which are unregulated and require each firm to establish their own risk management standards and processes. This is not altogether bad as it provides for company- and sector-specific design of risk management rather than a “one size fits all” approach. Brühwiler (2009c:21) makes that point for financial institutions when he writes that “almost all financial institutions which succumbed to the present financial crisis had many risk management activities in place, as for example the management of credit risk according to Basel II or the control of financial risks under the Sarbanes-Oxley-Act. Risk management was doubtlessly very intense, but unfortunately with the wrong focus, in the wrong place”.

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