ENTERPRISE RISK MANAGEMENT AND PERFORMANCE INCREASE IN THE BANKING SECTOR". SOTTOTITOLO: "Theoretical aspects and empirical analysis on international banks".

Abstract

The 2008 financial crisis represented a huge shock in the history of the banking sector. Analysis and studies conducted on this event highlighted that one of the major cause of this crisis is that financial institutions failed in effectively foreseeing and managing the risk of their activities. On this base, in the last decade there has been a deep global, and European in particular, reconstruction of the banking sector. In order to avoid another future crisis, after an initial phase of stabilisation, there has been a growing consensus that financial institutions’ board of directors has to show a major commitment in actively managing risk, implementing an effective enterprise risk management in order to correlate strategic objectives to risk itself. This thesis wants to demonstrate how an active risk management, implemented together with the main key performance indicators, leads to a competitive improvement in terms of performance. The first part includes an introduction of the European post-crisis banking environment, a presentation of the main financial institutions involved, as the European Banking Authority (EBA) and the financial institutions inside the SIFI, and a definition of what KPIs are. The project than gives a definition of risk and Risk Appetite Framework (RAF) from a KPI perspective, that is useful to relate risk and performance. An analysis of the RAF will lead to the creation of a RAF-performance correlation model, where some of the main performance indicators will be evaluated and correlated in order to provide analytical evidence of the idea at the basis of this thesis. This quantitative analysis will be integrated with a qualitative analysis, considering the UnicreditGroup S.p.A., as case study, to suggest some strategic proposals and the subsequent implementation in order to strengthen its position. Once the analysis are completed, some concluding remarks will be provided over the produced results, aiming to highlight that an active risk management and its incorporation inside the company decision processes leads to a performance increase.