Risk of regulatory failure of “risk-based regulation” while using enterprise risk management as a meta-regulatory toolkit

Abstract

PurposeDebate is growing around the expansion of risk-based regulation. The regulation scholarship provides evidence of regulatory failure of the risk-based approach in different domains, including financial regulation. Therefore, this paper aims to provide cautionary evidence about the risk of regulatory failure of risk-based strategy in the financial regulation while using enterprise risk management (ERM) as a meta-regulatory toolkit.Design/methodology/approachBased on interview data gathered from 30 risk managers of banks and five regulatory personnel, combined with secondary data, this study mainly explores the challenges for meaningful use of ERM based self-regulation in regulated banks. The evidence helps to assess the risk of regulatory failure of the risk-based regulation while using ERM.FindingsThe evidence reflects that regulated banks face diverse challenges arising from both peripheral and internal environments that limit the true internalization of ERM-based self-regulation. Despite this, the regulator uses this self-regulation as a meta-regulatory toolkit under the risk-based regulation to achieve the regulatory aims. However, the lack of true internalization of ERM based self-regulation is likely to raise the risk of regulatory failure of risk-based regulation to achieve the regulatory goals. Risk-based regulation is an evolving strategy in the regulatory regime. Therefore, care should be taken while using ERM as a regulatory toolkit before relying on it substantially.Originality/valueThe paper provides empirical insights about the challenges for effective use of ERM as a meta regulatory toolkit that might be useful practically both to the regulators and regulated firms.

Studi Enterprise Risk Management (ERM) Ditinjau dari Kekuatan dan Kelemahannya di Perpustaskaan Universitas Riau

“…Disimpulkan bahwa pemahaman ERM dan Model Manajemen Risiko Organisasi Standar Internasional diperlukan untuk memfasilitasi adopsi dan implementasi ERM secara luas di perusahaan bisnis di Nigeria untuk pembangunan ekonomi berkelanjutan. Moniruzzaman (2022), dalam penelitiannya yang berjudul"Risk of management as a metaregulatory toolkit" menemukan bukti mencerminkan bahwa bank yang diatur menghadapi beragam tantangan yang timbul dari lingkungan periferal dan internal yang membatasi internalisasi sebenarnya dari pengaturan mandiri berbasis ERM. Meskipun demikian, regulator menggunakan regulasi mandiri ini sebagai perangkat meta-regulasi di bawah regulasi berbasis risiko untuk mencapai tujuan regulasi.…”