Management Of Financial Institutions Research Articles

Marketing estratégico em territórios de baixa densidade

Na medida em que cidades e territórios ganham protagonismo, perante a economia globalizada, devem construir uma estratégia que lhes permitam definir produtos e buscar liderança. No entanto, os chamados territórios de baixa densidade, identificados pelo baixo índice de densidade demográfica, alto grau de envelhecimento da população e êxodo dos jovens, são abatidos por graves problemas socioeconômicos, e apresentam dificuldades para promover desenvolvimento. Dessa forma, o objetivo deste trabalho, sob a ótica de marketing de lugares, é investigar o posicionamento e a imagem de um município de baixa densidade, localizado na região centro-oeste do Rio Grande do Sul, propondo estratégias para seu desenvolvimento econômico e social. A metodologia revela uma pesquisa qualitativa, realizada através de entrevista em profundidade com agentes locais divididos em dois grupos: (1) públicos: composto por funcionários, agentes públicos municipais e agentes políticos; (2) privados: empresários de destaque e gerentes de instituições financeiras. Para melhor compreensão e análise dos dados foram construídas matrizes com as respostas de cada grupo. Concluiu-se que o local deve reposicionar sua imagem sobre dois aspectos: o turismo e as agroindústrias. Para tanto, sugere-se que o posicionamento do município seja o Enoturismo, seguindo estratégias de imagem, atrações, infraestrutura e pessoas. Assim sendo, o presente trabalho tem relevante contribuição teórica, sob o ponto de vista do tema e sua relação com os territórios de baixa densidade, ainda pouco explorados no Brasil, e prática, sugerindo direcionamento estratégico para o desenvolvimento de um município com índices sociais e econômicos abaixo da média do Rio Grande do Sul.
 Palavras-Chave: Marketing em Territórios. Desenvolvimento Regional. Territórios de Baixa Densidade.

Methods of motivation and incentiveness of average price managers in credit and financial organizations of Russia

Nowadays the situation in the sphere of social and economic development of Russia determines the special importance of organization activity of credit and financial orientation. The insufficient efficiency of activities of the credit and financial organizations of modern Russia is a consequence the low production of personnel’s work, one of the reasons of which is the existing system of motivation and stimulation. Middle managers in financial institutions are an important part of management personnel. They are the link in the organization: it is impossible to obtain results from managers of other levels and the organization as a whole without their effective work. Today the role of middle managers in achievement of efficiency of organizational activities is underestimated. The system of their motivation and stimulation needs enhancement. The article presents the data of a sociological survey, which analyzed the state of the system of motivation and incentives for managers of middle management in 10 modern Russian credit and financial organizations, and the application of specific methods, forms and tools of motivation are explored. The methods and their forms of motivating and stimulating the work of mid-level managers in the credit and financial organizations of modern Russia do not constitute a system. It is a conglomeration of different approaches, schemes, methods, means that do nоt constitute a single whole. At the present time the system of motivation and stimulation of middle managers can not be considered balanced and sufficient. It lags far behind the best foreign analogs and needs substantial optimization. Moreover, the task of catching-up modernization, and the task of primacy in the world market of banking services, is not facing Russian financial institutions The authors formulate directions for improving the motivation and incentives for middle managers in Russian credit and financial organizations, and give recommendations on the use of motivational methods and tools.

Employee Training and Succession Planning of Selected Deposit Money Banks in Abia State, Nigeria

Purpose- This study investigates the relationship between employee training and succession planning in deposit money banks in Abia State using cross-sectional survey. Ten deposit money banks were surveyed using simple random sampling technique. 
 Design/Methodology- A total population of one hundred and twenty staff was investigated with a sample size of ninety two. Validity of instrument was determined using face validity while Cronbach Alpha was used to ascertain the reliability of the instrument. Spearman’s Rank Order Correlation Coefficient (rho) was used to analyze the hypotheses with the aid of statistical package for social sciences (20.0). 
 Findings- The study found that employee training has a positive significant relationship with succession planning. It concluded that employee training measured in terms of on-the-job training and mentoring promotes succession planning in deposit money banks. 
 Practical Implications- The study recommends that managers, human resource professionals as well as directors of financial institutions should employ on-the-job training and mentoring for effective succession planning in the workplace.

THE INFLUENCE OF FINANCIAL INNOVATIONS ON EU COUNTRIES BANKING SYSTEMS DEVELOPMENT

This article summarizes the arguments and counterarguments in the framework of the scientific discussion on determining priority directions of developing banking systems, modern problems and prospects of introduction of financial innovations in the process of development of banking services. Its pace and current trends require a completely scientific basis. Accordingly, the purpose of the study is to determine the impact of modern information technology in the banking systems of the European Union countries and the future prospects for their development. For this purpose, the hypothesis was, first of all, proposed that the level of business activity of the banking activity is related to the level of development of the country's economy and it will determine in the future the development of the banking systems of these countries. An appropriate empirical study was conducted to confirm this hypothesis. The systematization of literary sources and approaches to the solution of this problem has shown that in scientific sources the analysis of the impact of financial innovations on the banking systems of individual European Union countries is mainly carried out. Taking into account the different levels of development of these countries, these studies do not allow us to make conclusions and suggestions as to the future of European banks. Electronic banking, the creation of a large number of fi tech companies, crypto volume, blockade – radically change the classical banking business. These changes are gaining momentum and the future of the banking system is now very ambiguous. Will classical banks be able to function effectively, or will new financial companies come to their place? What should I do to manage the bank to lay the groundwork for its successful operation, in the context of the rapid development of information technology? Who and how will regulate global financial markets? There are no clear answers to these questions. The methodical toolkit of the study was a clustering method, methods of systematization, grouping, comparison, expert evaluations. The study period covers 2015-2018, which shows the most rapid dynamics of changes in the processes of customer service of banks from the offline to the online sphere. In addition, this period of time is characterized by the rapid development of financial innovation, which radically changes the approaches to traditional banking activities. The article presents the results of cluster analysis, the results of which allowed to group the countries of the European Union at different levels of digitalization. As a result, it was found that the most advanced economies and the most developed countries have the highest level of deductibility of banking activity (related to clusters 2 and 1). As a higher level of economic development provides more opportunities for investment, Internet access and better education of the population. In addition, it can be argued that it is the countries from the first group in the near future will or will become leaders in the European market of banking services, and it is on them that they will need to be guided by the orientation of the development of the banking system. The results of empirical analysis, have shown that banking institutions understand the lack of prospects of activities without financial innovation. On the other hand, as the study showed, such activity is characterized by high-risk banks. The issue of safety of up-to-date financial transactions is extremely important for supervisors who can not at the moment agree on what measures to apply and implement in order to minimize the risks of financial transactions. The study empirically confirms and theoretically proves that it is important to understand and justify the basic principles of the future development of banks, to identify and develop measures to minimize the levels of financial risks associated with the implementation of financial innovations, as well as to simply understand and evaluate changes expected by users of banking services during the next 5 to 10 years. The results of the research can be useful for scientists, management of banking and other financial institutions, as well as for users of banking services.

МЕТОДИКА ОЦЕНКИ ОЖИДАЕМЫХ КРЕДИТНЫХ УБЫТКОВ КАК ИНСТРУМЕНТ УПРАВЛЕНИЯ РИСКАМИ НЕКРЕДИТНЫХ ФИНАНСОВЫХ ОРГАНИЗАЦИЙ

The article analyzes the use of IFRS 9 for credit risk management of non-credit financial institutions. In 2018, the new standard was applied for the first time in Russia, however, major market players – insurance companies and non-state pension funds – will only make the transition in 2022. This allows us to conclude that the study of this sphere is highly relevant. The hypothesis of the study is that the model for expected credit losses calculation can be used as a risk management tool for non-banking financial institutions. The study systematizes information from various legal acts and analyzes the impact of IFRS 9 on the financial statements of banks that have already begun to apply this model. Owing to the results of the study, it has been concluded that IFRS 9 allows organizations not only to adequately disclose information about financial instruments, but also to integrate risk management into the organization’s accounting. Existing examples of the transition to the new standard of credit organizations and small representatives of non-credit financial organizations show the importance of the adequate application of the expected credit loss model, but do not allow us to entirely use their created internal documents due to the specifics of insurance companies and nonstate pension funds.

Gerenciamento de resultados por meio da perda estimada de créditos em bancos brasileiros e luso-espanhóis

O estudo avaliou a existência de gerenciamento de resultado nas instituições financeiras brasileiras e luso-espanholas utilizando as estimativas de perda sobre operações de crédito. As estimativas sobre as operações de crédito constituem a principal estimativa das instituições financeiras, dadas as características das instituições, o gerenciamento de resultado no sistema bancário é especialmente delicado pelos riscos que as instituições financeiras estão expostas e potenciais impactos da efetivação dos riscos de não realização dos créditos. A literatura internacional evidencia que a administração de bancos faz uso de seu poder discricionário na constituição de estimativas de perda sobre as operações de crédito com o objetivo de gerenciar resultados. Neste sentido, a pesquisa voltou-se para análise das acumulações discricionárias em amostra de instituições financeiras brasileiras e luso-espanholas no período de junho de 2009 a dezembro de 2014. Como resultado, foi possível observar que as instituições financeiras brasileiras e luso-espanholas utilizam as despesas com provisões sobre as operações de créditos para gerenciar resultados.

Diseño de un modelo de gestión para la liquidación forzosa de Cooperativas de Ahorro y Crédito, período 2013 – 2017

En los últimos años el sector cooperativo ha tenido un mayor impulso, primero, al visibilizarlo y diferenciarlo de otros sectores que conforman la economía. Una muestra de esto fue la promulgación de la Ley Orgánica de Economía Popular y Solidaria, donde se norma al sector popular y solidario, y dentro de él, al sector financiero popular y solidario, conformado mayoritariamente por cooperativas de ahorro y crédito que antes tenían un control deficiente por no acoplarse a los modelos de gestión y de control de otras entidades financieras. Sin embargo, al crearse un organismo estatal de control, adaptado al estilo y a la lógica del cooperativismo y de la economía popular y solidaria, se empezaron a hacer ajustes al control de la gestión de dichas entidades, y dentro de estos controles se procedió a la liquidación forzosa de aquellas que tenían un manejo deficiente. El presente estudio quiere desarrollar un modelo para la gestión de las liquidaciones forzosas de entidades del sector financiero popular y solidario; para ello, se estableció un diagnóstico situacional para verificar cómo se hacen dichas liquidaciones, mismas que muestran una alta heterogeneidad en su gestión debido a las diferentes condiciones del medio local en el que se dieron los cierres de estas entidades. Por esta razón es necesario desarrollar un modelo de gestión que permita cumplir en el tiempo establecido por la Ley el proceso de liquidación forzosa de manera ágil y ordenada.

Research and methodological framework for managing the economic security of financial intermediaries in Ukraine

The effective management of economic security of financial and banking institutions at the application level is not possible without formulating the conceptual foundations of this process in the research and methodological plane. With that, the management system should take into account the specifics of financial intermediaries, which requires the development of specific research and methodological approaches. The purpose of the study is to generalize the conceptual framework for economic security management of banking and parabanking financial institutions as an integral part of ensuring the economic security of the financial market and financial security of the state. The authors propose an algorithm for managing the system of economic security of banks and other financial institutions, and identify the features, advantages and disadvantages of models for providing economic security. It is proved that managing the economic security system should consider the type of an institution, its size, the adequate personnel availability, and financial, information and material support. Consequently, effective economic security management should ensure its high level, and, therefore, partially solve the problem of regulating banking security, the financial market security, and, as a consequence, the financial security of the country.

Anticipating bank distress in the Eurozone: An Extreme Gradient Boosting approach

The banking sector plays a special role in the economy and has critical functions which are essential for economic stability. Hence, systemic banking crises disrupt financial markets and hinder global economic growth. In this study, Extreme Gradient Boosting, a state of the art machine learning method, is applied to identify a set of key leading indicators that may help predict and prevent bank failure in the Eurozone banking sector. The cross-sectional data used in this study consists of 25 annual financial ratio series for commercial banks in the Eurozone. The sample includes Eurozone listed failed and non-failed banks for the period 2006–2016. A number of early warning systems and leading indicator models have been developed to prevent bank failure. Yet the breadth and depth of the recent financial crisis indicates that these methods must improve if they are to serve as a useful tool for regulators and managers of financial institutions. Our goal is to build a classification model to determine which variables should be monitored to anticipate bank financial distress. A set of key variables are identified to anticipate bank defaults. Identifying leading indicators of bank failure is necessary so that regulators and financial institutions' management can take preventive and corrective measures before it is too late.

Corporate governance and the social performance: investigation on Tunisian financial institutions

PurposeThe purpose of this study is to show the specificities of the corporate governance of Tunisian financial institutions and the impact of the internal mechanisms of corporate governance of these institutions on their social performance. It is therefore interesting to establish the existing relationship between these mechanisms of corporate governance and the performance of a financial firm.Design/methodology/approachThis study aims to study the financial sector, generally characterized by its opacity, its regulation, its evolution and its obscurity. Therefore, a study based on the questionnaire method was recommended. The questionnaire is intended for managers. Therefore, the authors interviewed 138 managers of Tunisian financial institutions dispersed between agencies and headquarters in different regions (Gabes, Tozeur, Gafsa, Sfax, Sousse and Tunisia).FindingsAs a result, an impact on performance was observed according to the empirical study. Therefore, the authors can conclude an essential role of internal mechanisms for improving the social performance of a financial institution. The empirical findings in this paper lead to important conclusions. Indeed, the variables measuring the governance mechanisms have divergent effects on the social performance of the financial institutions subject to the sample. For the variables board of directors, confidence, culture, auditing, they have a positive effect. While, the incentive remuneration effect negatively the social performance.Originality/valueThis study will be based essentially on the financial sector in Tunisia: the credit institutions (22 banks), the establishments of leasing (eight companies of leasing), two factoring companies and two banks of cases which are listed on the Stock Exchange of Tunis (BVMT).

Collective action among rural poor

PurposeThe purpose of this paper is to establish the mediating role of collective action in the relationship between financial intermediation and financial inclusion of the poor in rural Uganda.Design/methodology/approachThe paper uses structural equation modeling (SEM) through bootstrap approach constructed using analysis of moment structures to test for the mediating role of collective action in the relationship between financial intermediation and financial inclusion of the poor in rural Uganda. Besides, the paper adopts Baron and Kenny’s (1986) approach to establish whether conditions for mediation by collective action exist.FindingsThe results revealed that collective action significantly mediates the relationship between financial intermediation and financial inclusion of the poor in rural Uganda. The findings further indicated that the mediated model had better model fit indices than the non-mediated model under SEM bootstrap. Furthermore, the results showed that both collective action and financial intermediation have significant and direct impacts on financial inclusion of the poor in rural Uganda. Therefore, the findings suggest that the presence of collective action boost financial intermediation for improved financial inclusion of the poor in rural Uganda.Research limitations/implicationsThe study used quantitative data collected through cross-sectional research design. Further studies through the use of interviews could be adopted in future. Methodologically, the study adopted use of SEM bootstrap approach to establish the mediating effect of collective action. However, it ignored the Sobel’s test and MedGraph methods. Future studies could adopt the use of alternative methods of Sobel’s test and MedGraph. Additionally, the study focused only on semi-formal financial institutions. Hence, further studies may consider the use of data collected from formal and informal institutions.Practical implicationsPolicy makers and managers of financial institutions should consider the role of collective action in promoting economic development, especially in developing countries. They should create structures and design financial services and products that promote collective action among the poor in rural Uganda.Originality/valueAlthough several scholars have articulated financial inclusion based on both the supply and demand side factors, this is the first study to test the mediating role of collective action in the relationship between financial intermediation and financial inclusion of the poor in rural Uganda using SEM bootstrap approach. Theoretically, the study combines the role of collective action with financial intermediation to promote financial inclusion. Financial intermediation theory ignores the role played by collective action in the intermediation process between the surplus and deficit units.

DIAGNOSTICS BY FINANCIAL REGULATORS OF FINANCIAL INSTITUTIONS PREPAREDNESS TO THE IMPLEMENTATION OF ECONOMIC SECURITY MANAGEMENT

DIAGNOSTICS BY FINANCIAL REGULATORS OF FINANCIAL INSTITUTIONS PREPAREDNESS TO THE IMPLEMENTATION OF ECONOMIC SECURITY MANAGEMENT

A method for modelling operational risk with fuzzy cognitive maps and Bayesian belief networks

A main concern of risk management in financial institutions is measurement of operational risk and its value at risk as a requirement of Basel II accord. Besides risk quantification, identifying causal mechanism leading to operational loss is necessary to plan risk mitigation activities. Bayesian belief networks (BBN) is a causal modelling method able to achieve both goals simultaneously. Eliciting BBN causal model and its parameters from expert knowledge is an alternative to data driven models in case of data scarcity. However, there is still a problem with parameter extraction for complex models with a number of multi parent and multi state nodes. In this paper, we proposed a method combining fuzzy cognitive maps (FCM) and BBN in order to improve BBN capability in modelling operational risks. In the first phase, a causal model is constructed by applying FCM and then a new migration method is proposed to translate FCM parameters to BBN ones. A case study of an Iranian private bank is then given to examine and validate the proposed method.

Social network

PurposeThe purpose of this paper is to test for the predictive power of each of the dimensions of social network in explaining financial inclusion of the poor in rural Uganda.Design/methodology/approachThe study employed a cross-sectional research design and data were collected from a total of 400 poor households located in Northern, Eastern, Central and Western Uganda. The authors adopted ordinary least square hierarchical regression analysis to test for the predictive power of each of the dimensions of social network in explaining financial inclusion of the poor in rural Uganda. The effects were determined by calculating the significant change in coefficient of determination (R2) between the dimensions of social network in explaining financial inclusion. In addition, analysis of variance was also used to test for variation in perceptions of the poor about being financially included.FindingsThe findings revealed that the dimensions of ties and interaction significantly explain financial inclusion of the poor in rural Uganda. Contrary to previous studies, the results indicated that interdependence as a dimension of social network is not a significant predictor of financial inclusion of the poor in rural Uganda. Combined together, the dimensions of social network explains about 16.6 percent of the variation in financial inclusion of the poor in rural Uganda.Research limitations/implicationsThe study was purely cross-sectional, thus, ignoring longitudinal survey design, which could have investigated certain characteristics of the variable over time. Additionally, although a total sample amounting to 400 poor households was used in the study, the results cannot be generalized since other equally marginalized groups such as the disabled persons, refugees, and immigrants were not included in this study. Furthermore, the study used only the questionnaire to elicit responses from the respondents. The use of interview was ignored during data collection.Practical implicationsPolicy makers, managers of financial institutions, and financial inclusion advocates should consider social network dimensions of ties and interaction as conduits for information flow and sharing among the poor including the women and youth about scarce financial resources like loans. Advocacy towards creation of societal network that brings the poor together in strong and weak ties is very important in scaling up access to and use of scarce financial services for improving economic and social well-being.Originality/valueContrary to previous studies, this particular study test the predictive power of each of the dimensions of social network in explaining financial inclusion of the poor in rural Uganda. Thus, it methodologically isolates the individual contribution of each of the dimensions of social network in explaining financial inclusion of the poor. The authors found that only ties and interaction are significant predictors of financial inclusion of the poor in rural Uganda. Therefore, the findings suggest that not all dimensions of social network are significant predictors of financial inclusion as opposed to previous empirical findings.

Earnings management in financial institutions: A comparative study of Islamic banks and conventional banks in emerging markets

This study seeks to examine earnings management practices of Islamic banks and conventional banks in emerging markets. Built upon the notion that organisations with higher ethical considerations are likely to have less severe agency problems, this study hypothesises that Islamic banks with their emphasis on religious and ethical principles would engage in lower earnings management practices as compared to conventional banks. In addition, this study also examines the effects of ownership structure towards earnings management of Islamic banks and conventional banks. This study employs a unique hand-collected financial dataset of 53 Islamic banks and 111 conventional banks over the period of 2006 to 2011 with a total of 838 bank-year observations. Inconsistent with the study's expectation, the results indicate that Islamic banks employ higher earnings management practices through abnormal loan loss provisions (ALLP) as well as to report small positive earnings (SMPOS) compared to their conventional counterparts. These findings are not parallel with Islamic notions of accountability, fairness and justice ethical concepts that should be embedded in all aspects of Islamic banks business activities. The results also show that high ownership concentration exacerbates earnings management practices through ALLP which suggest the entrenchment effect of the controlling owners to hide their private benefit extractions. This study offers some useful insights that in order to uphold the authenticity of Islamic ethical values in Islamic banks business practices, bank regulators should monitor the number of debt-based financial instruments and at the same time encourage the use of profit and loss sharing (PLS) mode of financial products in Islamic banking operations.

Strategic Performance Measure, Innovativeness, Enterpreuneurship and Strategic Outcomes

This study investigates the extent to which strategic performance measures (SPM) could enhance innovativeness and entrepreneurship by studying middle level of management in Indonesian financial institutions. The study analysed 157 data points using smartPLS. The study found that SPM leverages differentiation strategy only through innovativeness, rather than through entrepreneurship. This study also suggests that financial institutions in Indonesia should focus on innovativeness to differentiate themselves from their rivals, rather than trying to undercut rivals in price. Low-cost schemes cannot benefit those firms without innovativeness.
 Keywords: Entrepreneurship, innovativeness, strategic outcomes, strategic performance measures

Nexus between financial literacy and financial inclusion

PurposePremised on the argument that cognition structures the way how individuals think and make decisions, the purpose of this paper is to test the interaction effect of cognition in the relationship between financial literacy and financial inclusion of the poor in rural Uganda.Design/methodology/approachThe study used cross-sectional research design and quantitative data were collected and analyzed using Statistical Package for Social Sciences. Baron and Kenny guidelines were adopted to test for existence of moderating effect of cognition in the relationship between financial literacy and financial inclusion of the poor in rural Uganda. Furthermore, ModGraph excel software was used to establish the magnitude of moderating effect of cognition in the relationship between financial literacy and financial inclusion of the poor in rural Uganda.FindingsThe results revealed that cognition significantly moderate the relationship between financial literacy and financial inclusion of the poor in rural Uganda. In addition, both cognition and financial literacy also have direct effects on financial inclusion of the poor in rural Uganda.Research limitations/implicationsThe study adopted cross-sectional research design and data were collected by use of only questionnaires. Future studies through longitudinal research design may be employed. Besides, further studies using interviews may be adopted. Furthermore, this study collected data from only tier 3 financial institutions, thus, ignoring the other financial institutions. Future studies could focus on financial institutions under the other tiers.Practical implicationsThe findings from the study enlightens policy-makers, managers of financial institutions, and financial inclusion advocates on the importance of cognition in enhancing financial literacy among the poor, especially in rural Uganda. Cognition combined with financial literacy helps the poor to make wise financial decisions and choices toward consuming financial services and products provided by formal financial institutions. This leads to increased scope of financial inclusion of the poor in rural Uganda. Therefore, advocates of financial literacy should assess community cultural cognition and utilize them to design and fashion effective financial literacy interventions that can promote financial inclusion.Originality/valueThe study uses Baron and Kenny and ModGraph excel software to test for the interaction effect of cognition in the relationship between financial literacy and financial inclusion of the poor in rural Uganda. While several studies exist worldwide on financial inclusion, this study is the first to test the interaction effect of cognition in the relationship between financial literacy and financial inclusion of the poor in rural areas in a developing country context.

E-Banking Effects on Customer Satisfaction: The Survey on Clients in Jordan Banking Sector

In general, the managers in financial organizations and institutions are willing to maintain customer satisfaction, in order to minimize their cost and strengthen their competitive advantage.In Jordan, most of the commercial banks offer their banking services electronically. Therefore, this research aims to investigate the effects of electronic banking services on customer satisfaction in the lights of survey questions asked to 175 clients in Jordan. The reviewed literature indicates that convenience, privacy, cost, ease of use, personalization and customization and security are six indicators that affect level of customer satisfaction with E-Banking. The survey questions conducted in these six indicators and statistical results shows a positive relationship between level of customer satisfaction and usage of E-Banking among customers. There is positive relationship between five indicators and level of customer satisfaction and usage of E-Banking. Only Privacy is not discovered to have an effect on Customer Satisfaction in Jordan.

A LIQUIDATION RISK ADJUSTMENT FOR VALUE AT RISK AND EXPECTED SHORTFALL

This paper proposes an intuitive and flexible framework to quantify liquidation risk for financial institutions. We develop a model where the “fundamental” dynamics of assets is modified by price impacts from fund liquidations. We characterize mathematically the liquidation schedule of financial institutions and study in detail the fire sales resulting endogenously from margin constraints when a financial institution trades through an exchange. Our study enables to obtain tractable formulas for the value at risk and expected shortfall of a financial institution in the presence of fund liquidation. In particular, we find an additive decomposition for liquidation-adjusted risk measures. We show that such a measure can be expressed as a “fundamental” risk measure plus a liquidation risk adjustment that is proportional to the size of fund positions as a fraction of asset market depths. Our results can be used by risk managers in financial institutions to tackle liquidity events arising from fund liquidations better and adjust their portfolio allocations to liquidation risk more accurately.

How to Evaluate Risk Management Units?

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.