by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
The Canadian financial industry made it through the economic crisis relatively unscathed. In fact it was seen as a model for other countries to follow. Lots of commentaries were written about the strength of the Canadian banking system and views were given on the specific policies that paved the way for Canadian banks to look so good while banks from other countries had their issues.
I personally believe that the policies in Canada were nothing special. However there is one concept in Canada that was, and is, absolutely key. That concept is having regulation that is based on spirit of the law versus letter of the law. That is the fundamental difference between risk success and risk failure.
The question to ask yourself is whether or not the risk policies in your firm are written so that they will be followed in “spirit” or in “letter”. The more rigid, extensive, explicit (etc.etc.) the risk policy manual is, the more likely it is to be followed to the “letter”. What is needed is a policy that is written with the flexibility and the understanding that it should be followed to the “spirit”. Two very different concepts.
Note: Today makes the 100th blog from RSD Solutions! On behalf of RSD we wish to thank you for your support and reads and hope that our blogs have given you pause for thoughts on risk or perhaps the odd chuckle. We look forward to continuing our blogs and your future continued support.
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