Horst Simon The Original Risk Culture Builder’s Post

ECB's New Governance Guidelines: Why Banks Must Act Now to Address Deep-Rooted Risk Culture Issues The recent 2023 Supervisory Review and Evaluation Process (SREP) results reaffirm the ECB's longstanding concerns regarding governance and risk culture shortcomings in European banks. The newly proposed Guide on governance and risk culture offers deeper insights into these issues, particularly regarding risk culture, remuneration, and the evolving requirements under CRD6. The ECB's conclusion is clear: governance issues stem from deeper behavioural and cultural drivers that need to be addressed. This goes beyond policy and process fixes, signalling that a cultural shift is needed within banks. Sadly, there seems to be an increasing focus on the (useless and outdated) three lines of defence. This is an obstacle to building an effective risk culture in banks. The introduction of a fit and proper framework under CRD6, with a January 2026 compliance deadline, adds urgency. Experience from the UK's SMCR regime suggests that banks should begin preparations early, ensuring clarity in roles and responsibilities across management bodies. Additionally, the ECB's growing emphasis on emerging risks—such as those arising from digitalisation and geopolitical developments—further underscores the need for a forward-looking risk culture. Institutions must be proactive in identifying and managing these risks by aligning internal expertise and accountability. Failure to address these issues in a timely manner could prove costly. With the ECB empowered to use Periodic Penalty Payments for non-compliance, banks that delay governance and culture improvements face increasing financial risks. Now is the time for banks to take these guidelines seriously, assess gaps, and begin addressing the root causes of governance deficiencies. At a loss on where to start? Find help here: https://lnkd.in/enSBa2Xh European Central Bank #riskculture #Europe

Unlock cost-efficient #riskmanagement strategies explored in our paper, "Cost transformation in risk." Discover practical approaches to help reduce expenses without compromising quality in today's dynamic economic landscape. Learn more:

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Risk culture looks set to remain a central element of the ECB’s approach to bank governance. Indeed, it could well be listed as a formal ECB supervisory priority for the coming years, with the risk culture deep dives announced by Elderson serving as a model for on-site inspections at a wider population of banks. Ahead of any supervisory audits, banks should consider first performing their own risk culture assessment, to understand in detail the state of their current risk culture and identify any shortcomings. In parallel, banks should review their internal processes and records. This should only be seen as an exercise in gathering evidence to demonstrate the health of their risk culture tosupervisors. More importantly, it should be regarded as a powerful tool for management to fully understand the culture throughout the bank and drive continuous improvement in their risk culture and governance. #riskculturelab #riskculture https://lnkd.in/d-FAukXJ

Risk culture encompasses the collective mindset and the shared set of norms, attitudes and behaviours related to the awareness, management and control of risks at all levels in a bank. It shapes employees’ and managers’ day-to-day decisions and has an impact on their risk-taking behaviour. The management body has an essential role in establishing a sound risk culture. When the management body works as a team and creates an environment where members feel empowered to speak up, this positive “tone from the top” will enhance collaboration and team spirit across the whole organisation. The role of the chair is key here. If it is too dominant, there could be a lack of debate, and views and opinions could go unchallenged. On the other hand, management bodies that have a culture of encouraging constructive criticism tend to develop a broader range of views and opinions, based on different experiences, perceptions and values. This is crucial to avoid groupthink, remain informed about the various complex topics and reach good decisions in a rapidly changing environment. #riskculturelab #riskculture https://lnkd.in/epb6Y3E9

#Bank boards can help break down organizational silos to understand risk across the organization. My Crowe colleague Asaad Faquir- CCEP, MBA, MBS Faquir digs into this topic with Bank Director.

Radical acceptance has many practical applications in business. Radical acceptance quiets the noise created by yesterday’s decisions and today’s wishful thinking. It allows you to make a logical, forward-looking decision based on what’s likely to happen next—that and risk management are the big, relevant considerations. Otherwise, you’re just gambling, and most gamblers lose.

Risk isn't something to be afraid of, but you always have to keep it in mind. Your profit margins and productivity depend upon it-without risk, there can be no reward. Just finished Emerging Financial Risk Management! Check it out: https://lnkd.in/gfTnzXyH #financialriskmanagement

There is still time to sign up for our webinar with Risk.net, covering the enhanced capabilities of ERM frameworks. The expert panel will be discussing: ✅ Adaptable risk management strategies in volatile markets ✅ Aggregating risk in real-time across diverse portfolios ✅ Ensuring a unified view of risk between the front office and risk ✅ Technology advancements that support an ERM framework Register here > https://lnkd.in/g7xU3K9H #riskmanagement #banking #enterpriserisk

The most expensive mistake traders make isn't bad entries or poor risk management. It's something far more subtle... The inability to distinguish between relentless dedication and reckless persistence. Think about it: - You spend countless hours analyzing charts - You test every strategy you can find - You maximize screen time, convinced more hours = better results You think you're being dedicated. Relentless. Professional. But what if your "persistence" is actually what's holding you back? I've broken down this critical distinction in my latest analysis, showing traders exactly how to: - Turn dedication into measurable progress - Know if you're moving forward or spinning wheels - Build real trading skill instead of destructive habits Read the full breakdown here: https://lnkd.in/g7ZrazYm