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ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk

Nordvik Bank's head of risk reports that traders routinely conceal small limit breaches because colleagues who raised issues in the past were sidelined, while the bank's written risk policy is thorough. Which conclusion is most appropriate for the board?

The risk culture is weak. A sound written policy does not help if people hide breaches and speakers are sidelined, so the board must change leadership behaviour, incentives and speaking-up arrangements rather than just rewrite the policy or blame individuals.

  1. AThe risk policy is adequate, so the issue is a few individual rule breakers who should be disciplined
  2. BThe risk culture is weak, so the board should change incentives, leadership behaviour and speaking-up arrangements, not only the policyCorrect
  3. CThe bank should move risk ownership entirely to the third line to restore independence
  4. DThe bank should accept the breaches as immaterial because they are small

Explanation

Concealment and punishment of whistle-blowers show that the behaviours and attitudes towards risk (culture) are weak despite good documentation. The board should address tone at the top, incentives and escalation channels. Disciplining individuals alone ignores the systemic cause, and moving ownership to internal audit would compromise its independence.

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