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Dear CRO: behavioural risk management is the new thing for you

Author

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  • Scholten, Wieke
  • Chesterfield, Alexandra

Abstract

Behavioural risk management (BRM) helps to better prevent risk events that can hurt financial services firms, their customers, shareholders and society. Underpinned by methods and insights from across the behavioural sciences (such as organisational and social psychology, decision making and cognitive science, etc), this forward-looking risk management approach is increasingly encouraged by regulators and invested in by financial institutions globally. This paper provides a practical three-step approach to manage behavioural risk, illustrated with financial services case studies. Future developments are then discussed. The paper closes with common implicit beliefs that may hinder senior risk management professionals initiating BRM in their organisations and a manifesto for action to help get started.

Suggested Citation

  • Scholten, Wieke & Chesterfield, Alexandra, 2024. "Dear CRO: behavioural risk management is the new thing for you," LSE Research Online Documents on Economics 126004, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:126004
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    File URL: http://eprints.lse.ac.uk/126004/
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    More about this item

    Keywords

    audit; behavioural risk; behavioural science; culture; ethics; financial services; risk management; AAM requested;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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