Enhancing the quality of risk reporting: The roles of the risk decision maker and the accountable executive

Abstract

In the wake of the financial crisis, both regulators and banks came to realise the importance of complete, accurate and timely risk information in decision making. The ‘Principles of Risk Data Aggregation and Reporting’, published in 2012 by the Basel Committee on Banking Supervision, outline the disciplines required to improve the quality of risk data information. Since then, major banks around the world have been working to ensure that their risk data aggregation and reporting practices adhere more closely to the standards outlined in the principles. Enhancing the quality of risk information begins with understanding what information risk decision makers need in order to ensure the risk profiles of their institutions remain within risk appetite. Without that understanding, suppliers of risk information may supply too much of the wrong, and too little of the right information. Even if they supply the right information, it may not be good enough for risk decision makers to rely on, and poor decisions may well be the result. Equally important is ensuring that the executives accountable for supplying risk information have clearly defined responsibilities as well as the necessary authority to exercise those responsibilities. They must be in a position to influence decisions made with respect to report content, data management practices and systems architecture; risk data quality standards; and data quality issue management. Regardless of whether they have individual or collective accountability, their role must be clearly defined.