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NewsDecember 30 2009

IIF report highlights risk management holes

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Changes in risk management are fundamental to the future of banking, according to the International Institute of Finance's (IIF) recently published report on reform in the financial services industry. The report, published in conjunction with Ernst & Young, identified a number of improvements, including strengthening board oversight and improved better management.

Integrating risk functions within a firm remains a high priority and the report highlights specific areas that firms need to develop further, including governance and transparency, stress-testing, liquidity risk management, risk measurement and risk-aligned compensation. To successfully meet these targets, greater IT investment is needed for supervision and monitoring.

Reviewing internal risk management is necessary and firms need to balance their risk appetite and return to create a more risk-aware operating model so they can have more confidence in the effectiveness of their risk-management infrastructure. The IIF identifies changes in culture as vital to the effectiveness of any future risk-management recommendations.

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