Examine the Importance of Corporate Governance on Bank Risk Management Essay

Examine the Importance of Corporate Governance on Bank Risk Management - Essay Example It is also a process to maintain proper supervision over the functions of the employees, thereby controlling the flow of information inside the hierarchy. Thus, corporate governance is mainly utilised by various organisations in order to endorse corporate equality, transparency and responsibility among the members, which helps to enhance their motivation and morale, thereby improving the efficiency of an organisation. Moreover, it also ensures that proper management information is transmitted among the employees in order to maintain uniformity and justice in the organisation. This would be beneficial both for the organisation and the employees. Thus, with the help of corporate governance, proper control mechanisms can be ensured in order to maintain the business operations in a systematic and effective way. Hence, it can be depicted that the framework of corporate governance is also utilised for retaining an appropriate balance among the members of an organisation (International Fina nce Corporation, 2010). ... It can be observed that the penetration of corporate governance increased by a considerable extent in this recent era in order to condense the corporate scandals occurring in global markets (The Economist Intelligence Unit Limited, 2002). The paper mainly describes the importance and the benefits of corporate governance in organisations. Along with this, it also highlights the significant impact of corporate governance in managing the risks associated with banks. Importance of Corporate Governance on Bank Risk Management Corporate governance is the system by which business conglomerates are directed and managed in order to attain business objectives. Moreover, in modern times, corporate governance is implemented in most of the organisations as a strategic policy in order to handle the threats in a challenging way. The prime objective behind this approach is to eradicate financial and other risks. Corporate governance is unswervingly related with risk management of any financial organ isation, thereby acting as an umbrella to protect its perspectives (Colley, 2003). Risk management in financial institutions is most common as compared to other sectors. This is due to the fact that it mainly deals with fiscal instruments, thereby controlling both market and credit risks in a tactful way. It is so because financial risk can lead to economic downturn along with recession in the whole economy (The Economist Intelligence Unit Limited, 2002). Hence, corporate governance is extremely important in banks as it would enhance public faith and confidence, which is very essential for their efficient running. Thus, poor corporate governance in banks may lead to operations failure, which might cause considerable