Risk Governance and the Board: Actions to Ensure a Tight Reign on Post-Crisis Business and IT Priorities

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28 September 2009


A bank's performance during the crisis can be predicted by the degree to which its board engages with risk management. Resilient banks show much higher levels of board engagement, and have survived the crisis period without significant government intervention.

In the current climate, where there are calls from political, regulatory, and investor circles for fundamental reforms to risk, compliance, and governance practices, the stakes for financial firms have never been higher. A report, Risk Governance and the Board: Actions to Ensure a Tight Reign on Post-Crisis Business and IT Priorities, highlights risk governance best practices and provides a checklist of items that boards and senior managers need to take action on in order to get things right.

"Risk governance is so fundamental to the well-being of financial institutions that they should have every reason to invest serious effort in getting it right," says Cubillas Ding, senior analyst with Celent's Securities & Investments Group and author of the report. "Every firm would like to think of their risk management function as independent from the business. This is a rudimentary principle that is often 'true on paper' but not necessarily reflected in the realities that actually shape the behaviour of risk managers."

In this point of view report, Celent discusses seven best practice elements. Some are to be found among the recommendations in industry corporate governance studies and reports; others are not. The ideal structures and processes for risk governance vary from one institution to another, but certain elements of best practices are common to all. Boards and senior managers would do well to take heed and act sooner rather than later.