Knowledge Management and Risk Culture in the Banking Industry: Relations and Problems

The theme of risk governance in the banking industry has become a core aspect for regulators in particular since the financial crisis of 2007. The excessive exposure of many financial intermediaries to certain risk profiles (in particular credit and liquidity risks) is due to a set of causes, among which the lack of an adequate level of risk cultures. This term identifies the overall behavior of human resources and organizations when managing, monitoring, and dealing with specific risk profiles. Although banks have used professionalism and relevant methodologies with reference to risk management, this has not generated a further spread of the related skills throughout the organizational structure. This has generated a significant and widespread risk vulnerability of credit institutions. The main causes of this situation are probably to be found in the progressive development of "Originate To Distribute" management models, instead of the traditional "Originate To Hold" models, that led to a sort of supremacy of financial activities over the usual credit ones. The main aim of this study is to suggest that the recovery of an adequate sensitivity to the risk management can be effectively achieved through the use of knowledge management techniques able to influence values, norms, and practices of the members of the organization. The implementation of the related knowledge management process must follow a particular framework to ensure that all the activities needed to create, use, share, and preserve knowledge have been taken into consideration. Even though knowledge management is able to promote the strengthening of an adequate corporate risk culture, it is believed that at least two kinds of problems may occur: the mere partial diffusion of knowledge management general experiences within the banking sector and the lack of the joint presence of specific conditions able to help risk knowledge management tests achieve the desired results.