Special report on banking by ACCA shows how the financial services industry needs to learn where risk governance went wrong in the run-up to the 2023 bank collapses.
A new report by ACCA examines the impact of risk cultures in the banking industry and how financial institutions can learn from the failures of the likes of Credit Suisse and SVB.
Part of ACCA’s ongoing series of publications exploring what drives risk governance and cultures across different industries, “Risk cultures in banking: Where next?” sheds new light on the pressing need for the banking sector to adapt and innovate risk governance and culture.
Through surveys and member engagements, it delves into how risk and accountancy professionals should see risk management as enabling good things to happen, rather than only mitigating the bad things, if they are to help turn the dial in the right direction.
ACCA’s head of risk management and corporate governance for Policy & Insights, and author of the report, Rachael Johnson, says, ‘The 2023 banking collapses underlined the importance of transparency in preventing operational losses and reputational risk at banks. A strong risk culture supports this, ensuring trust in information for resilience and prudent risk taking.’
‘Accountancy professionals can act as risk super-networkers, aiding teams in informed decisions and sharing knowledge. By sharing stories, they can raise risk awareness, promote new insights, and influence organisational performance, which is what effective risk cultures are all about,’ she adds.
ACCA members working within the banking industry speak candidly about compliance challenges, concluding that while more dialogue is needed between banks and their regulators, there is not a lack of willingness but rather a complexity of an area that is fast becoming recognised as a “must tackle” for successful risk cultures everywhere – behavioural science.
The report discusses the dynamics of risk being more about human behaviour than mathematical models or process design flaws, and it includes 10 action points for banks, highlighting how stronger partnerships between risk, support units, and accounting functions can make a profound difference.
Md. Sajid Khan, Director – India, ACCA said, ‘This report urges financial institutions to learn from past failures, emphasizing transparency for resilience. It urges financial professionals to view risk management as an empowering force, fostering informed decisions. The report highlights the complexity of the industry, emphasizing the need for dialogue and collaborative efforts. Let’s embrace these insights to proactively shape a transparent and ethical banking environment in India.’
In the report’s closing remarks, Wirecard whistle-blower and CEO and founder of Confide, Pav Gill, emphasises whistleblowing as a powerful pillar of resilience. He urges those in the accountancy profession to be comfortable in the knowledge that diligent work leads to peaceful nights without concerns about negligence or oversight issues.
‘Remember the intrinsic motivation behind choosing this profession and elevate your pride in contributing to a transparent and ethical environment,’ he says.
Read the report here.
