Search results

Risk management is now considered the responsibility of all financial services professionals, not just senior leaders or risk specialists. Very little is known about the role of staff in risk management, so the purpose of this paper is to, first, clarify what constitutes “desirable” risk management behaviour by financial services staff based on the practitioner and regulatory literature. Based on this understanding, the authors analyse the characteristics of those who are most likely to display such behaviour.

The paper analyses some 36,000 survey responses across ten banks headquartered in Anglo countries.

Desirable risk management behaviour at the employee level includes compliance but goes well beyond mere compliance to include speaking up, thoughtful engagement with and accountability for the risk management framework. The authors find a significant negative association between individual risk tolerance and desirable risk management behaviour. Older workers as well as those with greater seniority are more likely to report desirable risk management behaviour. The link between female gender and risk management behaviour is not supported after controlling for individual risk attitudes. The authors provide evidence that females who succeed in financial services do not conform to traditional female stereotypes.

Findings suggest financial institutions should hire/retain more older workers and those with lower risk tolerance to improve risk management. Hiring more females, however, is not likely to lead to better risk management.

The paper is the first to investigate risk management behaviour in financial services staff. The research exploits a unique, difficult to obtain data set.