Risk Management by European Financial Firms

Risk Management Practices Adopted by European Financial Firms with a Mediterranean Connection

Simon Grima and Frank Bezzina

Following the economic and financial crises, any activity involv ing internal controls, especially risk management, has been given more attention. With this study, we aim to contribute further to the existing literature on risk management by looking at practices adopted by financial services firms licenced in Europe with a Mediterranean connection. We used parts of a questionnaire adopted by two of the authors in another study on risk management practices adopted by Maltese financial services firms and sent it to prospective candidates who work closely within risk management, to collect our data. This resulted in 1635 participants.

This data was used to (1) bring to light the mechanisms and strategies used in risk management by these organisations to maximise their opportunities, manage their risks, and maintain stability in their financials. Also, (2) we check if this is perceived as contributing to ‘principled performance’. Finally, (3) we examine the extent to which risk manage ment capabilities offer a competitive advantage to these firms. Our findings evidence that the objective by EMP and the EU, that is to ensure that members operate ‘on the same level playing field’ within risk management, in financial services of firms with a Euro-Mediterranean connection, has been achieved.

“Any organisation’s strategy needs to deal with an uncertain environment. Therefore, organisational strategic choices will determine the organisation’s exposure to an uncertain environmental and constituents that impact their performance. “Exposure” defined as the sensitivity of an organisation’s cash flows to changes in interrelated uncertain variables. The emphasis of organisation on specific particular (particularist view) rather than multidimensional uncertainties is a significant shortcoming. The former view of isolating specific uncertainties, excludes other interrelated uncertain variables. In fact, literature in financial services emphasises uncertainties for which hedging or insurance instruments can be designed to manage organisation exposures, however omitting some uncertainties that are encountered in the overall management strategic decisions. The alternative view is where management takes a general approach to risk and gives explicit consideration to numerous uncertainties (integrated risk management perspective) [18].”

Keywords: risk management, financial services industry, risk management frameworks, Euro-Mediterranean, principled performance.

Simon Grima and Frank Bezzina (November 5th 2018). Risk Management Practices Adopted by European Financial Firms with a Mediterranean Connection, Perspectives on Risk, Assessment and Management Paradigms, Ali G. Hessami, IntechOpen, DOI: 10.5772/intechopen.80640. Available from: https://www.intechopen.com/books/perspectives-on-risk-assessment-and-management-paradigms/risk-management-practices-adopted-by-european-financial-firms-with-a-mediterranean-connection

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