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Strengthening risk culture in financial institutions: evidence from UK based investment banks

Strengthening risk culture in financial institutions: evidence from UK based investment banks

Brickman, Karen ORCID: 0000-0002-0818-7485 and Hiebl, Martin (2019) Strengthening risk culture in financial institutions: evidence from UK based investment banks. In: Management Accounting as Social and Organizational Practice 2019, 25-26 Apr 2019, Bristol, UK. (Unpublished)

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Abstract

In the aftermath of the 2008 financial crisis the importance of a strong risk culture has been highlighted by practitioners, regulators and academia, as a way of preventing future crises. This paper explores the changing nature of risk culture in financial institutions post the 2008 financial crisis. Prior research has identified power imbalances between revenue-generating staff and the control functions as one major weakness of many banks’ risk culture prior to the crisis. After the crisis, regulatory efforts tried to reduce these imbalances and strengthen risk culture more generally. However, some recent evidence suggests that such endeavours were not overly successful and that the above mentioned power imbalances persist. To analyse these power imbalances and their potential mitigation in more detail, we draw on Hardy’s (1996) four dimensions-of-power framework. Our field study of ten UK based investment banks provides evidence that power imbalances between revenue-generating and control functions can be reduced, thus strengthening the risk culture. At the same time, our analysis also suggests that not all analyzed banks exhibit strengthened risk cultures. We attribute these variations in risk cultural change to varying mobilizations of the four dimensions of power and call for more research on the role of power and politics in shaping and changing risk culture.

Item Type: Conference or Conference Paper (Paper)
Uncontrolled Keywords: power, strategic change, remuneration code, risk-taking, risk culture, management control systems, financial services
Subjects: H Social Sciences > HG Finance
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Related URLs:
Last Modified: 18 Feb 2021 14:18
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
Selected for REF2021: None
URI: http://gala.gre.ac.uk/id/eprint/28455

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