Abstract
Risk management interacts with risk culture and both shape the bank's level of risk. We suggest that the risk management unit (RMU) is one possible mechanism through which they may interact. The financial crisis of 2008 emphasized the importance of risk management in financial institutions and the importance of the risk management unit (RMU). Despite the growing importance of the RMU, to date, there is no measure in the academic literature for evaluating its performance. We created a risk management unit index (RMUI) using a list of parameters that evaluate the functionality of the unit based on the current relevant literature. The RMUI transforms non-quantitative parameters into a simple and convenient index, allowing comparisons between RMUs. We found a positive association between the RMUI and the bank's risk management process as well as its risk culture characteristics, and a negative relationship to the number of past banking crises.
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