Risk culture

The topic of risk culture has repeatedly been the focus of national and international banking supervision in recent years. However, the 5th MaRisk amendment now raises specific questions regarding implementation. The comprehensive integration of an appropriate risk culture can be seen as an integral success factor in risk management, as it influences risk awareness at all levels, going beyond the identification, analysis and assessment of risks. A practised risk culture not only has an impact on management decisions, but also on the behaviour of all other employees in their daily work and on the risks they take.

Risk culture as proactive risk management from within

The integration of an appropriate risk culture does not mean the implementation of a new risk management approach, as central elements of a risk culture, such as the definition of strategic objectives and risk appetite as well as their communication to employees, were already part of MaRisk before the amendment. Instead, risk culture goes beyond this: it means anchoring a conscious approach to risk in day-to-day business both in management and among employees at all levels. Risk culture creates a risk awareness that characterises daily actions and thinking.

The four indicators named by the Financial Stability Board (FSB) in April 2014 are therefore considered to characterise an appropriate risk culture:

Tone from the Top

Exemplify the management culture (tone from the top). All members of management behave in accordance with the institution's value system and code of conduct and act within the defined risk tolerances. Through their example, they convey to the workforce what behaviour is desirable and communicate which risks and transactions can be entered into.
Accountability

The definition of employee responsibilities (accountability). These are set so clearly at all levels that employees are aware of the consequences of their decisions and omissions.
Effective Communication and Challenge

The promotion of open communication and critical dialogue (effective communication and challenge) on risk-relevant topics by management. This ensures that employees and management are open to alternative perspectives.
Incentives

The creation of appropriate incentive structures (incentives) motivates employees to demonstrate ethical and economically desirable behaviour through material and immaterial incentives.

Benefit from our expertise and many years of industry knowledge

Changes to an institution's risk culture address communication, leadership and remuneration and raise questions about the value system, code of conduct or ethically desirable behaviour. They begin with considerations and definitions of behaviours that are considered appropriate and are expected in the institution in the future. They should also be planned for the long term, as attitudes and behaviours cannot be changed immediately. Analyses of corporate culture, methods for quantifying culture and the operationalisation of its indicators should take into account the specific needs of the institute, particularly with regard to its existing organisational structure and communication channels.

We are happy to support you in all of the points mentioned. Contact us and benefit from our extensive knowledge and industry expertise. We will provide you with optimum support in the integration of a future-proof, practical and institution-specific risk culture.

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