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1 – 10 of 949The need for robust governance standards in financial institutions requires no overemphasis. However, instances of governance failures have been a recurring global phenomenon…
Abstract
Purpose
The need for robust governance standards in financial institutions requires no overemphasis. However, instances of governance failures have been a recurring global phenomenon. This paper examines the key elements of governance in financial institutions, evaluates reasons for failures and suggests ways to strengthen governance and prevent such failures.
Design/methodology/approach
The author follows a descriptive design and a behavioural approach to understand the governance issues in financial institutions.
Findings
The author identifies key elements of governance, and the potential reasons for failures and highlights that the structure of boards, thrust on the adoption of best practices and regulatory guidelines are necessary but not sufficient to ensure failsafe governance standards. The author emphasises the need for recognition of behavioural factors and a focus on continuous monitoring and red flagging of the conduct of key stakeholders by the third and fourth lines of defence. An effective whistle-blower policy, a clear focus on organisational culture and the subjugation of individuals to the systems can improve the robustness of the governance standards in financial institutions.
Originality/value
To the best of the author's knowledge and belief, the observations and suggestions made in the paper are original. The paper contributes by offering a nuanced perspective for strengthening governance in financial institutions.
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The purpose of this paper is to analyse and investigate how intensified regulatory requirements related to outsourcing have influenced and changed the outsourcing activities of…
Abstract
Purpose
The purpose of this paper is to analyse and investigate how intensified regulatory requirements related to outsourcing have influenced and changed the outsourcing activities of German financial institutions.
Design/methodology/approach
The study involved interviewing 11 outsourcing experts in the German financial sector, including four of the five largest banks in Germany. In coding and analysing the collected data, this study adopted the approach of a qualitative content analysis framework.
Findings
The study found that the revised legal requirements have had a significant and potentially negative impact on the efficiency of outsourcing, leading to a necessity for German financial institutions to internally realign their outsourcing managements. The study further revealed practical realigned methods German financial institutions executed to meet the legal requirements.
Originality/value
The impact, meaning and relevance of legal requirements in the outsourcing environment of German financial institutions has been relatively under-researched from a qualitative perspective and focused on other primary fields of investigation like outsourcing decisions and outcomes. This study has, by adopting a qualitative approach, addressed the identified gap by providing first-hand insights and new knowledge.
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Nathalie Brender, Marion Gauthier, Jean-Henry Morin and Arber Salihi
While the three lines model (TLM) provides an organizational structure to execute risk and control duties, research and practice show limitations in the model's implementation…
Abstract
Purpose
While the three lines model (TLM) provides an organizational structure to execute risk and control duties, research and practice show limitations in the model's implementation. These limitations result in governance issues. Such issues, together with control weaknesses, could be addressed by leveraging properties of distribution, transparency, and immutability of blockchain technology. To this end, in this paper the authors propose a conceptual control framework based on blockchain technology to augment control practice.
Design/methodology/approach
The design of the resulting blockchain-based control framework (BBCF) and its prototype, based on the design science research methodology (DSRM), is presented and discussed in terms of the potential impact in the context of the identified problems within the TLM.
Findings
One potential outcome of BBCF could be to redefine the scope and boundaries of some of the activities in audit and control practices from a more static to a more dynamic and prospective role. In a larger context of improving governance practices, the BBCF could set the path for a more inclusive and participatory interaction between the different governance actors of an organization.
Research limitations/implications
However, this assumes that blockchain is more widely adopted despite its complexity and rigidity.
Practical implications
BBCF covering both a conceptual model design and a reference implementation provides an innovation in audit and control. BBCF could include all relevant stakeholders who have an interest in corporate governance and control activities, including the regulators.
Originality/value
The contribution intends to serve both as a starting point for discussing the evolution of audit and control practice based on blockchain technology, as well as an initial actionable prototype for experimentation and further development.
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This study aims to understand independence in internal auditing by investigating how internal auditor independence is constructed when analysed in its corporate governance context.
Abstract
Purpose
This study aims to understand independence in internal auditing by investigating how internal auditor independence is constructed when analysed in its corporate governance context.
Design/methodology/approach
A critical discourse analysis (CDA) of the corporate governance reports of Swedish large stock market listed non-financial companies, for three consecutive years, is undertaken, using a theoretical lens of organisational embeddedness and operational coupling to understand independence as a situated practice.
Findings
The study develops four archetypes of internal auditor independence – autarchic, instrumental, symbiotic and subservient – and discusses each archetype's implications for independence, related to tripartite relations with management and the audit committee, regarding who has the mandate to direct work and how the work is done. It finds that internal auditors always have a capacity to be independent. Although they are not independent in relation to agents in the subservient archetype, they are independent of those down the organisational chain of command, suggesting independence is both situational and relational.
Research limitations/implications
The analysis contributes a novel approach to the literature and develops a conception of independence using the dimensions of embeddedness and coupling. The archetypes offer an analytical framework for future studies on independence.
Practical implications
Internal auditors may understand their practice differently through the archetypes that result from this study.
Social implications
Internal auditors' power relations within corporate governance further an understanding of the pressures on internal auditors and their role.
Originality/value
This study contributes new knowledge on the situatedness of independence by showing how internal auditors are embedded and coupled helps build their independence.
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Thomas Michael Brunner-Kirchmair and Melanie Wiener
Inspired by new findings on and perceptions of risk governance, such as the necessity of taking a broader perspective in coping with risks in companies and working together in…
Abstract
Purpose
Inspired by new findings on and perceptions of risk governance, such as the necessity of taking a broader perspective in coping with risks in companies and working together in interactive groups with various stakeholders to deal with complex risks in the modern world, the purpose of this paper is looking for new ways to deal with financial risks. Current methods dealing with those risks are confronted with the problems of being primarily based on past data and experience, neglecting the need for objectivity, focusing on the short-term future and disregarding the interconnectedness of different financial risk categories.
Design/methodology/approach
A literature review of risk governance, financial risk management and open foresight was executed to conceptualize solutions to the mentioned-above problems.
Findings
Collaborative financial risk assessment (CFRA) is a promising approach in financial risk governance with respect to overcoming said problems. It is a method of risk identification and assessment, which combines aspects of “open foresight” and the financial risk management and governance literature. CFRA is characterized as bringing together members of different companies in trying to detect weak signals and trends to gain knowledge about the future, which helps companies to reduce financial risks and increase the chance of gaining economic value. By overcoming organizational boundaries, individual companies may gain the knowledge they would probably not have without CFRA and achieve a competitive advantage.
Research limitations/implications
A conceptual paper like the one at hand wants empirical proof. Therefore, the authors developed a research agenda in the form of five propositions for further research.
Originality/value
This paper discusses the existing problems of financial risk identification and assessment methods. It contributes to the existing literature by proposing CFRA as a solution to those problems and adding a new perspective to financial risk governance.
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Said Bouheraoua and Fares Djafri
Islamic financial institutions (IFIs) are required to establish a Shariīʿah Governance Framework (SGF) to strengthen their Sharīʿah-compliance mechanism and ensure that all…
Abstract
Purpose
Islamic financial institutions (IFIs) are required to establish a Shariīʿah Governance Framework (SGF) to strengthen their Sharīʿah-compliance mechanism and ensure that all relevant IFI regulations are in line with Sharīʿah rules and principles. Effective implementation of the Shariīʿah-compliance function will further promote stakeholder confidence, as well as the integrity of IFIs, by reducing Shariīʿah non-compliance risks. This study aims to examine the internal control framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and explore the extent to which it can be incorporated in the Sharīʿah-compliance function of IFIs.
Design/methodology/approach
This study adopts a qualitative method of inquiry, utilizing the inductive method and content analysis to build comprehensive knowledge that will assist in exploring the framework of COSO methodology and the extent to which it can be adopted by IFIs.
Findings
The findings indicate that the existing frameworks of Sharīʿah governance, whether that of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) or Bank Negara Malaysia (BNM), need to be further developed. Therefore, the adoption of COSO methodology in the internal Sharīʿah audit of IFIs, as suggested by AAOIFI, is not only possible but desirable. The study also finds that the COSO framework places the highest priority on risk management in that it makes it an integral part of the decision-making process in all the institution's activities. As a result, incorporating the comprehensive COSO risk management structure within the Sharīʿah-compliance function will enhance risk management in IFIs.
Originality/value
This study highlights the importance of the COSO internal control framework and examines its components, principles and the possibility of its adoption by IFIs. The findings of this study are expected to contribute to enhancing the Sharīʿah-compliance function of IFIs.
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Kari Sippola, Jukka Pellinen, Antti Rautiainen, Toni Mättö and Vesa Voutilainen
This study aims to explore the formation of municipal risk management (RM) and the reasons for the differences of RM practices between the seven biggest cities in Finland.
Abstract
Purpose
This study aims to explore the formation of municipal risk management (RM) and the reasons for the differences of RM practices between the seven biggest cities in Finland.
Design/methodology/approach
The empirical data of this comparative qualitative case study comprises 33 interviews conducted with municipal managers. Supplementary material includes documentary material on municipal rules governing RM as well as annual reports and risk tools used in the municipalities.
Findings
This study found differences in cities with respect to when, how and why RM practices had evolved. The results indicate that differences in RM practices and development paths between cities are largely explained by the differences in the original reason to initiate RM, time span since its introduction, professional and educational backgrounds of risk managers, local risk events and accounting infrastructure such as RM tools developed in a city. These findings also suggest that even within the same municipality, different functions can be at different phases regarding RM.
Originality/value
This study reports on RM as a new form of accounting in the field of Finnish municipalities. This highlights how fairly uniform considerations at the field level lead to variation in the elaboration of RM practices at the municipal level. The study finds that different paths in the development of local RM involve iterative evolution between the phases of emergence, largely explained by contextual differences. This study contributes to understanding the emergence of new accounting forms in a municipal RM context.
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