2015年-世界发展银行全球_Risk_Culture_Risk_Governance_and_Balanced_Incentives___Recommendations_for_Strengthening_Risk_Management_in_Emerging_Market_Banks_88页_1mb

Summary of Risk Culture, Risk Governance, and Balanced Incentives: Recommendations for Strengthening Risk Management in Emerging Market Banks

Core Content

This report, published by the International Finance Corporation (IFC) in August 2015, provides recommendations for strengthening risk management in emerging market banks. It emphasizes the importance of risk culture, risk governance, and balanced incentives as critical components of an effective risk management framework. The report aims to support the development of sustainable and responsible financial services in emerging markets, particularly for Micro, Small, and Medium Enterprises (MSMEs).

The report is structured into three main chapters:

1. Risk Culture in Banks
2. Risk Governance in Banks
3. Incentive Programs in Banks

Each chapter includes best practices, maturity rating scales, and conclusions to guide banks in improving their risk management practices. Additionally, the report contains an implementation guide, working definitions, and annexes that provide practical tools and examples for risk culture, governance, and incentive programs.

Main Views

Risk Culture

• Definition: Risk culture refers to the collective attitudes, behaviors, and values of a bank's Board of Directors, senior management, and employees regarding risk.
• Key Elements:
  • Risk Competence: Includes skills, learning, and recruitment practices that support effective risk management.
  • Organization: Encompasses strategy, values, and policies that guide risk management.
  • Relationships: Involves communication, leadership, and challenge mechanisms that influence risk behavior.
  • Motivation: Relates to performance management, risk orientation, and accountability.
• Importance: A strong risk culture ensures that risk management is embedded in all levels of the bank and that employees are motivated to take prudent risks.
• Best Practices:
  • Align management systems and behavioral norms with the bank’s risk strategy.
  • Ensure that all employees understand and adhere to the bank’s risk appetite.
  • Encourage open communication and constructive challenge in risk-related discussions.
  • Implement training and learning programs to enhance risk management capabilities.

Risk Governance

• Definition: Risk governance involves the principles and structures that ensure the identification, management, and communication of risk within the bank.
• Key Elements:
  • Risk Appetite Statement: Defines the acceptable level of risk for the bank.
  • Risk Management Framework: Includes risk identification, assessment, mitigation, and monitoring.
  • Board Oversight: The Board is responsible for setting the tone and ensuring accountability in risk management.
• Importance: Effective risk governance is essential for embedding the right risk culture and aligning risk-taking with the bank's long-term objectives.
• Best Practices:
  • Define and assign clear roles and responsibilities for risk management functions.
  • Establish a transparent and participatory decision-making process.
  • Ensure that risk management is integrated into all aspects of the bank's operations.

Balanced Incentives

• Definition: Balanced incentives refer to the alignment of compensation and reward structures with the bank’s risk appetite and management practices.
• Key Elements:
  • Performance Management: KPIs should reflect risk management outcomes and influence appropriate risk-taking behavior.
  • Risk Orientation: A common risk language should be promoted throughout the organization.
  • Accountability: Employees and management should be held accountable for their risk-related decisions.
• Importance: Incentive programs play a crucial role in shaping employees' attitudes toward risk and ensuring that risk management is a priority.
• Best Practices:
  • Align incentives with the bank’s risk strategy and long-term goals.
  • Ensure that incentive mechanisms promote prudent risk-taking.
  • Regularly review and update incentive programs to reflect changing risk dynamics and regulatory expectations.

Key Information

• Target Audience: Emerging market banks, especially those looking to improve their risk management practices and support MSMEs.
• Focus Areas:
  • Risk culture, including skills, learning, and motivation.
  • Risk governance, including strategy, values, and accountability.
  • Balanced incentives, including performance management and risk orientation.
• Tools Provided:
  • Maturity Rating Scales for risk culture, risk governance, and balanced incentives.
  • Case Studies from banks in various emerging markets.
  • Implementation Guide (Appendix 1) that outlines a step-by-step approach to developing and maintaining a strong risk culture, governance, and incentive framework.
• Sources of Guidance:
  • Basel Committee on Banking Supervision
  • International Monetary Fund (IMF)
  • European Securities and Markets Authority (ESMA)
  • Financial Conduct Authority (FCA)
  • World Bank
  • Institute of International Finance (IIF)
• Partnership: The report was developed in partnership with Deloitte and supported by the Government of Japan.

Conclusion

The report underscores that risk culture, governance, and balanced incentives are interdependent and must be developed in tandem to ensure effective risk management. It provides practical guidelines, tools, and examples to help emerging market banks improve their risk management frameworks. The implementation guide and maturity rating scales are especially useful for banks to assess their current practices and identify areas for improvement. The report also highlights that there is no one-size-fits-all solution, and recommendations must be tailored to the bank's size, complexity, and regulatory environment.

Appendix Highlights

• Annex 1: Illustrative Code of Conduct
• Annex 2: Illustrative Whistle-Blower Policy
• Annex 3: Illustrative Board Risk Committee Charter
• Annex 4: Illustrative Terms of Reference for a Chief Risk Officer
• Annex 5: Illustrative Risk Appetite Statement
• Annex 6: Illustrative Training Program for the Board of Directors
• Annex 7: Illustrative Training Program for Risk Champions
• Annex 8: Illustrative Board Risk Committee Evaluation Questionnaire

These annexes offer practical examples of how banks can structure their risk management practices, policies, and training programs to support a strong risk culture and governance framework.

References

• The report cites various studies and publications from international financial institutions, regulatory bodies, and professional organizations. These include the Basel Committee, IMF, ESMA, FCA, World Bank, and IIF, among others.

Tables and Frameworks

• Table 1: Shows the interrelationships between risk culture, risk governance, and balanced incentives.
• Figure 1: Illustrates the Risk Culture Framework, which includes four key drivers: risk competency, organization, relationships, and motivation.

Final Note

The handbook is a comprehensive resource for emerging market banks aiming to improve their risk management practices. It offers guidance, tools, and examples to help banks develop a robust risk culture, effective risk governance, and balanced incentive programs.