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5/16/13 - The Missing Ingredient in Risk Management

Risk management at large financial institutions has become increasingly sophisticated and rigorous during the past 20 years, spurred by expert guidance and tighter regulatory scrutiny. But despite the proliferation of deeper and broader risk-management tools and processes, governments and central banks around the world just five years ago were forced to take a series of dramatic, unprecedented steps to avert a global financial catastrophe. The new risk-management tools failed to prevent a systemic financial crisis — at the heart of which were many of the very institutions considered to be most proficient in their use. Clearly, something critical was — and is — too often missing from the risk-management discipline.

Please click below to read a Sightlines InFocus by Michael Patriarca that argues that culture is an essential ingredient in the first line of defense for large financial institutions, and offers some steps that companies can take to build and sustain a culture that aligns businesses with the risk appetites set by the board of directors.

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