Restoring Confidence: Risk management capabilities in the wake of the financial crisis

Restoring Confidence: Risk management capabilities in the wake of the financial crisis

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An Economist Intelligence Unit Research Program Sponsored by Protiviti

The financial crisis of 2008 did more than expose weaknesses in the capital reserves and liquidity risk management of financial institutions. It also revealed profound weaknesses in many financial institutions' three lines of defense: business operations, risk management controls and independent assurance.

 

Financial institutions rely on these to protect against risk; each of these lines had many questions to answer. First and foremost: What failed? On close examination, failure in each line of defense bears some responsibility for the crisis.

 

To assess the state of risk management following the financial crisis, The Economist Intelligence Unit (EIU) conducted a survey sponsored by Protiviti of 350 senior-level executives at financial institutions across the globe.

 

 

Key takeaways are:

  1. Regulatory pressures will continue to be a significant burden for financial institutions and will demand preparedness for expanded and intensified enforcement, but also lead to beneficial outcomes for clients. 
  2. While foundational progress has been made, efforts must now focus on the more granular day-to-day details in the areas of culture, accountability, team- and skill-building, and communication – particularly in the front office.
  3. Main obstacles relate to lack of resources, inadequate funding and improving IT capacity.

 

 

Infographic:

EIU Risk Research Infographic

 

 

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