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The 1988 Basel Accord and the proposed revisions to the Accord represent some of the most significant international regulations impacting the financial decisions of firms, in this case, financial services firms, in recent years. The revisions to the Accord incorporate operational risk into the capital, supervisory and market requirements. In our review of the issues in this area, we provide insight into the workings of an important international regulation. We also present suggestions for further research in this area that will become feasible when data on the impact of the new regulations become available after the proposed implementation in 2006.

Indian Companies Act (2013) and revised clause 49 of Securities and Exchange Board of India (SEBI) provides for a major overhaul of corporate governance norms to be adopted by firms in India. Some of the key provisions of the act pertain to board subcommittees. Given this background, the chapter seeks to analyze the role of overall board composition and board subcommittees (audit, nomination and remuneration and risk management committee) on firm performance. In addition, the relationship between ownership and firm performance is analyzed. The study documents that large listed companies in India that have constituted a nomination and remuneration committee have had positive influence on firm performance as measured by Tobin’s Q (TQ). Board subcommittees’ (i.e., audit, nomination and remuneration and risk management committee) independence is positively associated with firm performance as measured by TQ. Overall, the board size is positively associated with firm performance. However, in the presence of a nomination and remuneration committee, board size is negatively associated with firm performance. This study offers insights for policymakers interested in analyzing corporate governance practices in terms of board subcommittees as evidenced from a developing economy such as India.

This study challenges the conventional theoretical approach of the ‘Three Lines of Defence’ Model adopted by most of the Maltese credit institutions. The authors propose a paradigm shifting conceptualised framework that would alter the corporate governance structures of banks. The objective is to test the feasibility and willingness of credit institutions to adopt such an approach.

This study challenges the current practices of the internal auditing profession and organisations and invites them to evaluate their structures whilst recognising the benefits of adopting a combined assurance function.

In order to test this hypothesis, the authors sought out semi-structured interviews with controllers (Internal Auditors, Risk Managers and Compliance Officers) within Maltese Credit Institutions, varying in size from significant, medium-sized and small institutions; personal from the Malta Financial Services Authority – The regulator, the Big four audit firms and members of the Malta Forum of Internal Auditors, and practitioners working both within and outside the financial industry.

There were two contrasting opinions regarding the suggested proposition. On the one hand, those operating within the credit institutions, as well as the regulator and the external auditors, do not believe that the proposition of integrating risk, compliance and internal audit functions (IAF) in one team would be possible; the reason being that independence, which is the cornerstone of every IAF, would be severely impacted. On the other hand, there were those practitioners working outside the banking industry but with sufficient experience and knowledge in the field, who challenged the traditional concept of independence. They argue that the functions should not be separate from each other because they have much in common.

Four themes emerged from the study: (1) challenges as a concept, (2) benefits, (3) risks and (4) condition for successful implementation. All interviewees, from risk departments, boards, external auditors and regulators agree that a strong, knowledgeable and independent IAF is fundamental to every organisation but more so within the financial industry. Nevertheless, this study revealed two schools of thought that emerged from the findings in relation to the IAF and its regulation, and specifically, when the authors presented the proposition of an integrated function.

Central America is exposed to a variety of natural hazards such as earthquakes, volcanic eruptions, landslides, and floods. The region, located on four connected tectonic plates with 24 active volcanoes and in the path of hurricanes, has experienced 348 major disasters from 1981 to 2010, resulting in 29,007 deaths and US$16.5 billion in direct economic losses. Therefore, all six Central American countries rank among the top 35 countries in the world at high mortality risk from multiple hazards. The countries in this region, including Costa Rica, began paying attention to the disaster risk management (DRM) initiative recently, after Tropical Storm and Hurricane Mitch in 1998, which was the region’s worst catastrophe of the century. After the devastation by Mitch, several local DRM capacity development projects were implemented in the region. By reviewing these project profiles of local DRM implemented in the region, this chapter identifies outcomes, lessons, and challenges of DRM at the local scale, from Mitch to the present, as a baseline for incorporating climate disaster risk reduction into local development planning.

Companies face a wide number of risks and need to have in place appropriate measures and techniques to be able to identify, manage, and monitor risks. Risk management is a fundamental responsibility of the corporate governance structure of an organization; it means managing all risks on a holistic basis, all together rather than just one, through an appropriate and systematic process. This chapter provides an overview of enterprise risk management in the United Kingdom. It presents key information on the economic system of the United Kingdom, emphasizing the role of small and medium enterprises, and presents country macroeconomic highlights. It provides a summary of regulation, practices, and authorities; it presents the key milestones of the regulation on corporate governance and reporting in the United Kingdom, and stresses the importance of corporate governance mechanism in companies' enterprise risk management practices. Further, it discusses the importance of transparency and disclosure in the context of enterprise risk management, specifically the relevance of risk management and internal control related disclosure in the annual reports and accounts. Finally, it reviews the growing academic research on enterprise risk management and previous studies on risk disclosure practices in companies' reports.

Purpose – Since risk management is crucial for achieving strategic objectives in a complex and uncertain environment and its effectiveness relies deeply on efforts to create a risk-conscious culture, this study aims at understanding whether risk management can be promoted and reinforced by the use of performance-based monetary incentives given to Board members and top managers.

Methodology/approach – This study is explorative in nature and investigates four case studies based on document analysis and semi-structured interviews with risk managers.

Findings – Results show that some companies have already adopted risk measures in incentive schemes. At the same time all interviewees agree with the usefulness of linking traditional performance-based monetary incentives to risk management objectives in order to improve the effectiveness of the latter and to create a risk-aware culture. However, the difficulty in identifying proper measures has been underlined.

Practical implications – The study confirms the feasibility of linking risk dimensions to reward systems and suggests that firms should move in this direction. The study also outlines and proposes some possible measures to reward managers.

Limitations – This study views risk as measurable and managerially actionable and focuses only on incentives while acknowledging the use of other mechanisms that can contribute to the creation of an informed risk culture. Furthermore, the integration of risk management with other management control systems and accounting instruments has not been analyzed.

Value of the paper – This study addresses firms and their stakeholders’ need to make top managers more accountable for risk in their decision-making.

As South Africa (SA) increasingly becomes overwhelmed by natural disasters, understanding disaster risk reduction (DRR) policies, institutions, processes and practices and their effects on disaster risk management (DRM) are incumbent The study reviews and empirically analyses policies, institutional frameworks and processes for disaster management in SA. Content analysis is applied to review topical secondary data, while a structured questionnaire informed by the Sendai Framework for Disaster Risk Reduction is used to collect quantitative data from a random sample of 228 disaster policy actors from five disaster-stricken metropolitan cities in five provinces in SA, namely North-West, Free State, KwaZulu-Natal, Limpopo and Mpumalanga. Empirical data were analysed using the Statistical Package for the Social Sciences (SPSS) software. Research findings reveal that SA is endowed with rich institutional policy and legal frameworks for DRM, based on the concepts of decentralisation and stakeholder participation. A positive and strong correlation between institutional framework, disaster risk identification and prioritisation, knowledge creation and management (KCM) as well as the disaster governance and DRM in SA (p = 0.000). Although the coefficient of KCM is not statistically significant, DRM behaviour was influenced at 87.2% by all four variables. Based on the recent disaster experiences and the above results, we advocate for DRR to be continuously prioritised at national and decentralised levels, to enhance effective preparedness, mitigation, disaster response and resilience building practices in SA.

The governance of capital market institutions did not receive much interest compared to their banking sector counterparts, partly due to their different ownership structures. Recent trends; increased competition, technological advances, structural changes, globalization, all had their share of impact on governance systems of capital markets institutions particularly on exchanges. Corporate governance of non-financial firms and capital markets institutions differ in several ways. Firstly the role of risk management differs since they may impose systemic risks to the financial system. Secondly well-implemented governance structures and processes are required but are not sufficient in capital markets since there are several conflicts of interests to be addressed. Therefore whether and how effectively they function is what matters. Thirdly the governance structures of such institutions exhibit different effectiveness on their decisions.The governance of FIs in capital markets is discussed in terms of board structure and management, risk governance, supervisors, shareholders, executive compensation, role of regulators, authorities and values and culture. The role of stock exchanges in corporate governance are discussed separately in terms of implementing corporate governance codes, demutualisation and its impact on regulations, transparency and accountability issues and the effects of M&As among exchanges. Market needs strong analytical tools and reliable benchmarks to assess governance risk. The corporate control and the regulation of the institutions by the exchanges when the corporations (regulated) are the competitors of the exchanges (regulators) or owned by the stockholders of the exchanges must be addressed. The risk of regulatory arbitrage, calls for the need of harmonisation among regulators. Better regulation of FIs and greater global coordination among regulators are seen as the most two important issues to prevent another crisis.

Our study investigates the relationships between risk management systems (RMS), strategy and organizational performance. The existing research has extensively studied the effect of strategy on organizational performance. There is also a growing body of literature suggesting that RMS positively influence the achievement of organizational objectives. However, there are only a few conceptual papers (and no empirical evidence) on the relationship between strategy and RMS. We investigate whether different strategy types (defender, analyzer, prospector, and reactor) induce different levels of RMS development and, hence, affect performance indirectly, as well as directly. We use regression analysis and survey data to test the proposed relationships. Our results confirm the direct effects of strategy type and RMS development on performance. We confirm that prospectors perform better than defenders, analyzers, and reactors across five measures of performance (profitability, sales growth, market share, new product development, and customer satisfaction). We also find that companies with more developed RMS perform better in terms of non-financial performance (measured by new product development). Contrary to the prevailing evidence, we do not find significant results for financial performance. Moreover, our findings show that there is no mediating effect of RMS development in the relationship between strategy type and performance. This implies that RMS and strategy act as independent variables, each individually affecting organizational performance.