Use Case for Assessing Corporate Governance & Ethics Risk
Why assess the risk? Given the important financial intermediation role of banks in the economy, the public and the market have a high degree of sensitivity to any difficulties potentially arising from any corporate governance shortcomings in banks. Poor corporate governance can contribute to a bank’s failure and can lead to markets losing confidence in the ability of the bank to properly manage its assets and liabilities, including deposits, which could in turn trigger a bank run or a liquidity crisis. In addition to its responsibilities to shareholders, the bank also has a responsibility to its depositors and to other recognized stakeholders. The presence of an effective corporate governance system helps to provide a degree of confidence that is necessary for the proper functioning of a community bank.
Who should assess the risks? Board Chairperson, Board Members, Chief Executive Officer / President, Legal Counsel
How to assess the risk: Rate the KRIs to determine if a threat would successfully exploit a vulnerability and to justify expenditures to implement countermeasures to protect the bank’s assets or reputation.