Risk Culture and Effective Risk Governance
First published:
ISBN: 9781782720997
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The Investor Perspective on Risk Culture
Peter Montagnon
Introduction: Understanding Risk Culture and What To Do About It
Risk Culture: Definitions, Change Practices and Challenges for Chief Risk Officers
Risk Culture: A View from the Board
The Views of the PRA on Risk Culture and Risk Governance in Banks and Insurers
Risk Appetite and Risk Culture: A Regulatory View
The Investor Perspective on Risk Culture
Values-driven Performance Management
Creating a Culture of Success: Reducing the Likelihood of Conduct Failures
Internal Audit and Risk Culture
Compensation and Risk: Regulation and Design of Incentive Schemes
A View from the Remuneration Committee: Emerging Good Practice in the UK
Risk Transparency and Risk Culture for Financial Institutions
The Importance of Data and IT for a Strong Risk Culture
The Role of Whistleblowing in Risk Culture and Effective Governance
This chapter looks at the role of shareholders in contributing to risk management and oversight. It begins by considering the overall attitude of investors in terms of time horizons and investment approach, noting that shareholders are not a homogeneous group. While there are many, often egged on by sell-side analysis, who seek short-term returns and encourage leverage, there is also a substantial body that takes a long-term view and would prefer to engage. This community has developed a clear understanding of what to expect from companies in terms of risk management and oversight, as exemplified in the work of the International Corporate Governance Network (ICGN) and the Financial Reporting Council (FRC). The chapter examines these conclusions, before moving on to consider shareholder expectations of company reporting and the impact of the UK Stewardship Code. It concludes that, while shareholders will not be a first line of defence in risk management and oversight, they can make an important contribution and should be encouraged to do so.
SHAREHOLDER TIME HORIZONS AND INVESTMENT APPROACH
Rightly or wrongly, a substantial portion of blame for the 2007–08 financial crisis was
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