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Basel II regulations, incorporated into national law by many countries, require banks to develop and implement effective risk-management strategies and processes. But besides these regulatory requirements, banks have a vital interest in the proactive management of risk and return that encompasses all sources of risk. Continuous and purposeful asset allocation supports the competitiveness of a bank and creates value, thereby satisfying the stakeholders. Profound risk-management operations; a suitable risk culture spread throughout the firm; adequate methods, processes, and instruments; and organizational structures, which are all part of risk governance, enable a bank to successfully respond to a dynamic and volatile operating environment. The increasing complexity of the banking business — but also the tremendous opportunities arising from a fast-changing and globally interconnected business environment — calls for a comprehensive and integrated approach to the management of risks. The formulation of consistent strategies and the implementation of efficient controll processes are ultimately part of the a bank’s management responsibility. Consequently, management must be in a position to assess holistically the prevailing risks and take informed decisions on the management of those risks and, in some cases, on counterbalancing efforts which aim at improving the overall situation. |
