Abstract
Purpose: The application of holistic risk management is fast becoming a standard measure of good governance in the business arena. What role can holistic risk management play in the management of risk in the financial services industry? The aim of this paper is to propose a holistic risk management framework for the management of risk. Design/Methodology/Approach: A comprehensive framework that covers the holistic view risk management is proposed/developed out of an extensive literature review. Findings: Given the deliberations of various frameworks, a holistic risk management is proposed. The proposed framework ensures that all components of risk management are taken into account when strategizing for risk management in general and holistic risk management in particular; thereby improving the management of risk in the banking industry. Implications: The article proposes a holistic approach to risk management which takes into account all the facets of risk management, e.g. analyzing, planning, strategy, communication, implementation, motivation, systems review and plan modification. This holistic approach, when implemented in the banking industry, can have a significant impact on the improved management of risk. Originality/Value: The new proposed holistic risk management framework offers a fresh perspective of strategizing for risk management in terms of risk analysis, risk planning, risk strategy, risk communication, risk implementation, risk motivation, risk review and risk plan modification.
Highlights
The existence and viability of banks relies heavily on the management of risks with the responsibility on the board of directors and management to identify, measure, monitor, control and verify different risks within the banking industry
Risk management as a core activity in banking and the approaches to and processes applied to risk management in the banking industry are explored
Due to the important role of effectively managing risk in this dynamic industry, holistic risk management is proposed as a method of optimally achieving the effective management of risk
Summary
The existence and viability of banks relies heavily on the management of risks with the responsibility on the board of directors and management to identify, measure, monitor, control and verify different risks within the banking industry. This article highlights that conventional risk management theory may no longer be appropriate within the changing banking environment of today and this translates into a need to nurture a culture within banks that values a proactive and holistic manner in managing risks. In this respect, holistic risk management (HRM) is a response to the growing need for a benchmark of the best practice for those who manage and regulate complex banking activities. This framework comprises of the following eight steps, namely: (1) holistic risk analysis; (2) holistic risk planning; (3) holistic risk strategy; (4) holistic risk review and communication; (5) holistic risk implementation planning; (6) holistic risk motivation and control; (7) holistic risk systems review of results; and (8) evaluation and plan modification
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