S&P risk management benchmarking study
Our
Banking Bureau
13 May 2002
Shanghai: Standard & Poors (S&P) has said economic considerations and a desire to increase shareholder value are key driving factors for banks while addressing the issue of risk-based capital.
Although
the proposed regulatory changes under Basel II have clearly
been a catalyst for renewed focus on risk management,
more fundamental business issues have kept the pressure
on banks to implement strengthened risk management practices,
Roy Taub, executive managing director of S&Ps Risk
Solutions group, told the 35th
annual meeting of the Asian Development Bank here.
Taub introduced S&Ps inaugural Risk Management Benchmarking study, which involved more than 50 banks from North America, Europe and the Asia-Pacific region. The study covered five key aspects of risk management: risk governance and strategy; market risk; credit risk; operational risk; capital management.
The study revealed three major areas of interest and concern, said Taub. Firstly there is a clear recognition that risk management practices need to be embodied in the core strategy and culture of the bank. Secondly, there is a need to adopt an integrated approach to managing risk throughout an institution. And finally, economic considerations and shareholder value are viewed as key drivers, not simply regulatory proposals.
In the Asia-Pacific region, the study reassuringly revealed that in some areas of risk management the regions banks are at similar stages of development as those in the more mature markets. However, said Ken McLay, managing director, S&P Risk Solutions group in Asia, while the regions banks are working towards an integrated risk management framework, the study revealed that several factors are inhibiting the development of robust risk management cultures and processes.
In the Asia-Pacific region, there is generally a weaker connection between risk management and corporate strategy, and participating banks revealed a lower level of involvement by their board and executive committee in creating risk management vision, than in more developed markets.
