IDEAS home Printed from https://ideas.repec.org/a/eme/jrfpps/15265941011043639.html
   My bibliography  Save this article

The growing importance of risk in financial regulation

Author

Listed:
  • Marianne Ojo

Abstract

Purpose - The purpose of this paper is not only seek to trace developments that have contributed to the importance of risk in regulation, but also to justify why risk has become so significant within regulatory and governmental circles. Design/methodology/approach - This task will be facilitated through a consideration of theories associated with risk, and by reference to two forms of risk regulation, namely risk‐based regulation and meta regulation. As well as a consideration of the application of both in jurisdictions such as the UK, the paper adopts a comparative approach through references to the their application in jurisdictions such as Germany, Italy, and the USA, and also through a comparison between meta‐regulatory strategies and risk‐based regulation. Findings - This paper concludes that all regulatory strategies should take into consideration the importance of management responsibilities – both on individual and corporate levels. Meta‐risk regulation has not only assumed such a prominent position in regulation through its application in Basel II, but also is preferred to risk‐based regulation – not only because of the element of ambiguity which risk‐based regulation introduces into its assessment (through a consideration of the external environment of the firm), but also because of its impact of the use of external auditors in regulation and supervision. Practical implications - The practical implications of a move towards risk‐based regulatory strategies, and meta‐regulatory strategies in particular, is that courts are simply not adequately equipped to deal with the pace with which some financial instruments, such as derivatives, operate. Originality/value - This paper not only introduces originality through its comparative approach and the choice of jurisdictions involved, but also through the attention it draws to the need for more innovative techniques such as meta regulation. Meta regulation can be considered to be the most evolved and collaborative form of regulation, which is best suited for such an ever‐evolving and changing regulatory environment that currently exists.

Suggested Citation

  • Marianne Ojo, 2010. "The growing importance of risk in financial regulation," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 11(3), pages 249-267, May.
    • Handle: RePEc:eme:jrfpps:15265941011043639
    DOI: 10.1108/15265941011043639
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/15265941011043639/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/15265941011043639/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/15265941011043639?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Parker,Christine, 2002. "The Open Corporation," Cambridge Books, Cambridge University Press, number 9780521818902, January.
    2. Marco Moscadelli, 2004. "The modelling of operational risk: experience with the analysis of the data collected by the Basel Committee," Temi di discussione (Economic working papers) 517, Bank of Italy, Economic Research and International Relations Area.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ojo, Marianne, 2009. "The Growing Importance of Risk in Regulation," MPRA Paper 13723, University Library of Munich, Germany.
    2. Stefan Mittnik & Sandra Paterlini & Tina Yener, 2011. "Operational–risk Dependencies and the Determination of Risk Capital," Center for Economic Research (RECent) 070, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    3. Embrechts, Paul & Puccetti, Giovanni & Rüschendorf, Ludger, 2013. "Model uncertainty and VaR aggregation," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2750-2764.
    4. Steven Kou & Xianhua Peng, 2014. "On the Measurement of Economic Tail Risk," Papers 1401.4787, arXiv.org, revised Aug 2015.
    5. Marco Rocco, 2011. "Extreme value theory for finance: a survey," Questioni di Economia e Finanza (Occasional Papers) 99, Bank of Italy, Economic Research and International Relations Area.
    6. Pavel V. Shevchenko, 2010. "Implementing loss distribution approach for operational risk," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 26(3), pages 277-307, May.
    7. Paul Embrechts & Giovanni Puccetti, 2006. "Bounds for Functions of Dependent Risks," Finance and Stochastics, Springer, vol. 10(3), pages 341-352, September.
    8. Valérie Chavez-Demoulin & Paul Embrechts & Marius Hofert, 2016. "An Extreme Value Approach for Modeling Operational Risk Losses Depending on Covariates," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(3), pages 735-776, September.
    9. Ruthanne Huising & Susan S. Silbey, 2021. "Accountability infrastructures: Pragmatic compliance inside organizations," Regulation & Governance, John Wiley & Sons, vol. 15(S1), pages 40-62, November.
    10. Hsueh, Che-Fu, 2014. "Improving corporate social responsibility in a supply chain through a new revenue sharing contract," International Journal of Production Economics, Elsevier, vol. 151(C), pages 214-222.
    11. Gary Johns, 2005. "Deconstructing Corporate Social Responsibility," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 12(4), pages 369-384.
    12. Anselm Schneider & Andreas Scherer, 2015. "Corporate Governance in a Risk Society," Journal of Business Ethics, Springer, vol. 126(2), pages 309-323, January.
    13. Ojo, Marianne, 2010. "Building on the trust of management: overcoming the paradoxes of principles based regulation," MPRA Paper 32243, University Library of Munich, Germany.
    14. Gowthorp, Lisa & Greenhow, Annette & O’Brien, Danny, 2016. "An interdisciplinary approach in identifying the legitimate regulator of anti-doping in sport: The case of the Australian Football League," Sport Management Review, Elsevier, vol. 19(1), pages 48-60.
    15. Jonathan Edwards & Simon Wolfe, 2007. "Ethical and Compliance‐Competence Evaluation: a key element of sound corporate governance," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 359-369, March.
    16. Sarah Vandenbroucke & Jaroslaw Kantorowicz & Yvonne Erkens, 2024. "Decoding supplier codes of conduct with content and text as data approaches," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(1), pages 472-492, January.
    17. Ojo, Marianne, 2007. "The role of the external auditor in bank regulation and supervision: A comparative analysis between the UK, Germany, Italy and the US," MPRA Paper 32614, University Library of Munich, Germany, revised Jan 2008.
    18. Francisco Venegas-Martínez & José Francisco Martínez-Sánchez & María Teresa V. Martínez-Palacios, 2016. "An analysis on operational risk in international banking: A Bayesian approach (2007–2011)," Estudios Gerenciales, Universidad Icesi, vol. 32(140), pages 208-220, September.
    19. Calcott Paul, 2011. "Corporate Liability and Internal Procedures," Review of Law & Economics, De Gruyter, vol. 7(1), pages 319-336, November.
    20. Robert Jarrow & Jeff Oxman & Yildiray Yildirim, 2010. "The cost of operational risk loss insurance," Review of Derivatives Research, Springer, vol. 13(3), pages 273-295, October.

    More about this item

    Keywords

    Regulation; Risk; Finance; Auditing;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jrfpps:15265941011043639. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.