Management of Behavioral Risk in the First Line of Defence

14 Pages Posted: 28 Sep 2017

See all articles by Jürgen Bott

Jürgen Bott

University of Applied Sciences, Kaiserslautern

Udo Milkau

DZ Bank AG

Date Written: September 26, 2017

Abstract

Events in the last decade (such as the financial crisis, the settlement of legal claims against banks and criminal activity in the form of rogue trading) have underlined the importance of non-financial risks for banks, ie, risks other than market or credit risk. Approaches to dealing with non-financial risk range from risk governance to the methodology of modeling risk. The behavior of decision makers has been identified as a new type of risk: behavioral risk. However, less attention is paid to behavioral risk management in the first line of defence. This paper discusses key features of fighting behavioral risk in the business line of operations as the central hub for all transactions in a bank. Starting with examples such as best practice in aviation, it will examine different possible solutions, from training single subject-matter experts to communication at enterprise level.

Keywords: behavioral risk, decision making, best practices, bias and heuristics, first line of defence

Suggested Citation

Bott, Jürgen and Milkau, Udo, Management of Behavioral Risk in the First Line of Defence (September 26, 2017). Journal of Operational Risk, Vol. 12, No. 3, 2017. Available at SSRN: https://ssrn.com/abstract=3043173

Jürgen Bott

University of Applied Sciences, Kaiserslautern

Morlauterer Str. 31
Kaiserslautern
Germany

Udo Milkau (Contact Author)

DZ Bank AG ( email )

60265 Frankfurt am Main
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
373
PlumX Metrics