New York City, July 30, 2013 - Five years after the global financial crisis, leading financial services firms have continued to take major steps to remake their risk governance frameworks and have made substantial progress in implementing risk-management changes, according to "Remaking financial services: risk management five years after the crisis," a new report by EY in conjunction with the Institute of International Finance (IIF). Among the key findings, a renewed emphasis on risk culture has moved to the top of the list as a chief focus for boards and senior management.

Key findings are:

• Banks are reviewing their cultures across legal entities and business units, acting on lessons from the crisis and high profile conduct cases.
• There has been increased focus on operational and reputation risk.
• Banks have enhanced risk management, but are still working to operationalize changes, for example, embedding risk appetite remains a challenge for 48% of respondents.
• Moves to enhance risk transparency are driving further enhancement of stress testing.
• Business models are being rethought in the light of regulatory changes, with banks exiting activities (44% of respondents), markets and geographies.

The report is the fourth annual study of its kind, based on a survey of 74 firms across 36 countries, including interviews with Chief Risk Officers (CROs) and other senior risk executives as well as online survey responses from 66 global banks and 8 insurance companies.

Patricia Jackson, EY's Head of Financial Regulatory Advice for Europe, Middle East, India and Africa (EMEIA), who directed the study, said: "Much has been achieved in improving risk management frameworks but more change is still needed. Embedding risk appetite remains an aspiration in many banks and enhancements are ongoing to improve stress testing and overall risk transparency. IT and data remain impediments in many areas. Nonetheless the largest change in this year's survey is the further emphasis on reviewing culture and on operational and reputation risk."

Rick Waugh, Vice Chairman of the IIF and Chairman of its Committee on Governance and Industry Practices and CEO of Scotiabank, added: "This year, we've seen a large shift in the focus of firms towards testing culture and then shifting the culture as necessary. Clarity on the values is essential, reinforced by training, but most importantly, accountability throughout the organization. The fact that 44% of respondents are actually exiting businesses reflects the changing risk appetite. The dramatic changes we are seeing provide hard evidence that a changed risk culture is being embedded in our organizations."

Additional significant findings of the report include:

• Banks are still ratcheting up board oversight of risk (51% of respondents). And there is a focus on board skills to make this effective - 34% have added board members with risk expertise in the past year.
• Liquidity risk remains at the top of agendas, with a slow move away from supremacy of ALM committees towards a wider executive focus on balance sheet risks.
• Capital management is being rethought across the industry, with 55% of respondents aligning capital allocation with regulatory capital.

Tim Adams, President and CEO of the IIF, stated: "In the years since the crisis, financial services companies have taken a hard look at their internal risk management frameworks, practices and actions. The findings of this year's study show that the industry has recognized the need for change, and further, that those changes are being put into place. While there is more work to be done to make these new processes operational, the boards and management of these firms are well on their way to executing the changes necessary to operate in today's interconnected and global financial system."