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SYNPULSE ’ S BAKHTAR ON THE BIASES BANKS NEED TO MOVE AWAY FROM
Below , Synpulse ’ s Marouane Bakhtar details the changes banks should make to move away from a passive compliance-driven approach to a proactive risk management culture .
The biases banks need to move away from :
• Having inadequate risk models : Banks use risk models to predict potential losses and manage risk exposure , however , these models are based on historical data and may not accurately capture the full range of possible outcomes . This leads to a massive gap between the risks banks think they are taking vs actual risks they are actually exposed to
• Being short-term focused : Banks tend to focus too much on short-term risks , and not enough on long-term risks
• Being passively compliance driven , as opposed to pro-actively risk management focused : there is a big gap between following a set of rules defined by regulators vs . effective risk management ( actively identifying and mitigating risks )
• Suffering from cultural issues : there is a gap between the risk culture banks aspire to have vs . the risk culture they actually have
• Lack of agility : Banks need to be agile , especially in an economically uncertain environment . They should be able to adapt to changing circumstances . What usually happens is that Banks rely on bureaucratic structures and slow decision-making processes
66 September 2023