Management

The Risk Management Function in the Financial Sector-

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Title: The Risk Management Function in the Financial Sector - How Independent are
Chief Risk Officers in Swedish Banks?
Seminar date: 2012.05.30
Course: Master thesis in business administration, 30 University Credit Points (30 ECTS).
Authors: Maria Helmersson, Patricia Pålsson
Advisor/s: Håkan Jankensgård
Five key words: Enterprise Risk Management (ERM), Chief Risk Officer (CRO), Risk Management (RM), independence, financial sector.
Purpose: The purpose of this thesis is to measure the level of independence of the CRO function in the four major Swedish banks.
Methodology: By undertaking a deductive reasoning and a qualitative approach, the CROs of the four major Swedish banks have been interviewed. We have constructed a scoring system, based on the publication Principles for Enhancing Corporate Governance, published by the Basel Committee on Banking Supervision (BCBS). From this regulation we constructed seven criteria to measure the level of independence in each bank’s risk function. The scoring system was supplemented with a scale of the level of independence ranging from zero to twelve points, where a full score of twelve points is required in order for the bank to be considered as having excellent independence in the CRO function.
Theoretical Perspectives: The thesis covers theories around the relationship between risk and return to describe the built-in conflict in the financial sector. Further the centralized approach of ERM is reviewed. Window dressing around ERM is also discussed. Further, publications and guidelines by the BCBS as well as the Swedish “Finansinspektionen” is used as a theoretical ground.
Empirical Foundation: Interviews were completed with the CROs in each of the four major Swedish bank.
Conclusions: Two of the investigated banks have an excellent independence in the CRO- function. One bank has eleven points and is considered as satisfactory, close to excellent. The fourth bank gains five points and shows a weak level of independence in its CRO- function.

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1-68

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English

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The Risk Management Function in the Financial Sect

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