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Strategic Risk of a Bank: Assessment Proposals and Interrelation with the Compliance Risk
Bezrodna O. S.

Bezrodna, Olena S. (2019) “Strategic Risk of a Bank: Assessment Proposals and Interrelation with the Compliance Risk.” Business Inform 12:317–324.
https://doi.org/10.32983/2222-4459-2019-12-317-324

Section: Finance, Money Circulation and Credit

UDC 336:330.131.7

Abstract:
The article is aimed at forming a procedure for assessing the bank’s strategic risk and substantiating its relation to the compliance risk of financial monitoring. The concept of strategic risk is considered and the expediency of delineating its types into primary one and secondary one is substantiated, which is taken into account in the development of the assessment procedure. The proposed strategic risk assessment procedure includes three phases: the first phase involves defining the primary strategic risk by generalizing results of the ratio of actual and planned values of parameters in measurement of the degree of achieving the bank’s strategic objectives (grouped by the subsystems of a balanced scorecard); the second step is to define the secondary strategic risk using seven criteria for assessing the organizational-economic provision of the bank’s strategic management; the third stage is to substantiate the overall level of strategic risk of the bank on the basis of generalization of the conclusions on the first and second stages of the procedure. The article provides recommendations on explaining the results of the quantitative assessment of the bank’s strategic risk by differentiating its qualitative levels - high, moderate, and low. It is concluded that, on the one hand, a significant gap between the actual and planned values of indicators, which reflect the strategic priorities of the bank, as well as the inefficiency of the bank’s strategic management mechanism can make it to focus (for financial gain and strategic financial objectives) on the use of a formal approach to compliance with financial monitoring legislation. On the other hand, the implementation of the compliance risk of financial monitoring and, as a result, taking enforcement actions on the side of the NBU versus the bank can increase in the level of its strategic risk.

Keywords: strategic risk, bank, balanced scorecard (BSC), compliance risk, financial monitoring.

Fig.: 1. Tabl.: 2. Bibl.: 23.

Bezrodna Olena S. – Candidate of Sciences (Economics), Associate Professor, Department of Banking and Financial Services, Simon Kuznets Kharkiv National University of Economics (9a Nauky Ave., Kharkiv, 61166, Ukraine)
Email: [email protected]

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