The lack of stature and resources for risk management cited

 

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The lack of stature and resources for risk management cited as key factors of crisis, says KPMG study NEW YORK, January 6
Nearly three-quarters of executives of banks must be strengthened Said industry regulation

NEW YORK, January 6 / PRNewswire / - As banks to examine the factors leading to the current credit crisis, it becomes clear that risk management is not generally considered essential for strategic decision making , according to a survey by KPMG LLP, the audit, tax and advisory firm.

Over three-quarters (76 percent) of the World Bank of nearly 500 senior executives interviewed said that risk management is still stigmatized as a support function to their bank. Only half (48 percent) stated that risk management is seen as the responsibility of everyone in the organization, and another 45 per cent of respondents said their board of directors may lack know-how . In addition, 64 percent of respondents said their main risk needs to take a greater influence on the development strategy, despite 81 per cent of respondents indicated that risk management is considered by the bank as a competitive advantage.

"The risk management program in May have been put in place in most banks, but the survey indicates that there are gaps in the implementation of these plans," said Michael Conover, a principal in practice financial risk management at KPMG LLP. "Financial models does not prevent the risk of bad decisions, people do. To restore confidence in banking risk management policies, banks should begin by changing the culture of risk, including risk management by providing a seat at the table when decisions are taken, the senior education and advice on the best risk management practices, and to set the right tone at the top. "

Main causes, solutions to credit crisis

When asked to rank the main contributors to the credit crisis, the leaders of the bank and appointed incentive pay (54 percent), followed closely by the lack of risk governance (50 percent) and culture of risk (48 percent). Interestingly, 73 percent of respondents said the credit crisis has illustrated the need to tighten regulation in the banking sector. However, only 36 percent said that regulators should be more involved in setting compensation for the industry.

"With a crisis of this magnitude, there is never a single cause, and the survey shows that many in the banking sector believe that the combination of forces - incentives to take risks, failures in the banks and the set of risk governance and culture - were at stake, "said Conover." But stronger regulation is not the solution. Banks have already taken steps to improve and fill gaps in their talent risk management programs, which should go a long way in helping to repair the problems. "

Indeed, 85 percent of respondents said they had considered or are currently reviewing their risk management procedures, with another seven percent say they plan to undertake an examination. Yet only 42 percent of respondents have done - or plan to do - fundamental changes in their risk.

"Improved enterprise-wide risk management policies and lead to more informed decision-making, since decisions are not made in silos," said Conover. "This modern risk management should be based on three lines of defense - the business "on the ground", the function of risk management and internal audit. "

When asked what they should be at the top of their banks to focus in the coming years, the executives interviewed cited reporting and risk measurement (78 percent), governance risk (77 per cent ) and the culture of risk (77 percent). The survey also revealed that 78 percent of respondents want to improve the way risk is measured and reported to help improve the accuracy of forecasts.

Other key findings of the survey:

      - Surprisingly, only a fifth (19 percent) of respondents believe that
          "silo" mentality contributed to the credit crisis, yet
          majority, that the communication between different parts of the
          business needs to improve.
      - Only half (53 percent) of respondents currently entitled to executives
          with great practical experience of risk management in place, although 62
          percent of executives said that the acquisition or development of risk management
          skills will be the priority for the management of investment risks.
      - Nearly a quarter (23 percent) of executives said they have no risk
          commission, or plans to install one.
      - Only 40 percent are non-executive directors of risk management
          experience. Twenty-four percent expect to remedy this shortage of skills,
          leaving 36 percent with no plan in this field.
      - Overall, 54 percent of executives surveyed said their bank does not
          not spend enough resources on risk management.
KPMG Risk Management in Banking "survey conducted by the Economist Intelligence Unit, was based on telephone interviews conducted in October 2008 with 496 senior executives of organizations involved in business, retail, investment and private banking and asset management. Three-quarters (76 percent) of banks participating in the survey have a Chief Risk Officer (CRO) or equivalent.

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), the U.S. member firm of KPMG International. KPMG International member firms have 123,000 professionals, including more than 7100 partners in 145 countries.


      Contact:
      Jennifer Hurson
      KPMG LLP
      201-307-8187
      jhurson@kpmg.com
SOURCE KPMG LLP

CONTACT: Jennifer Hurson of KPMG LLP, +1-201-307-8187, jhurson@kpmg.com

Copyright © 2009 PR Newswire Nearly three-quarters of the leaders of banks Said It must strengthen the regulation of the industry NEW YORK, Jan