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Abstract: 

Financial institutions face unique challenges in risk management. Not only are they exposed to traditional business risks, but also to those inherent in the business of banking—for example, credit risks, interest rate risks, and liquidity risks. Financial institutions operate in a heavily regulated environment that creates compliance risks of its own, and failure to manage these risks to the satisfaction of regulators may result in enforcement actions and significant reputational harm. Additionally, public policy considerations have increasingly required financial institutions to take on responsibilities not strictly relevant to business and banking, such as combating terrorist financing and other forms of money laundering. As a result, it is critical that financial institutions implement comprehensive Enterprise Risk Management programs designed to identify, monitor, and minimize risk and create a corporate culture in which risk management efforts are considered on an equal basis with other strategic efforts.

Keywords: board responsibility; risk committee of board; chief risk officer; corporate culture

Affiliations:  1: Arnold & Porter LLP; 2: Arnold & Porter LLP; 3: Arnold & Porter LLP.