Enterprise-wide risk management One of the challenges the Federal Reserve System has as the umbrella supervisor of financial holding companies is to encourage the evolution of corporate governance within organizations that keeps pace with changing business strategies. Earlier in my remarks I referred to the challenges to investors, managers, and boards of directors in understanding complex organizations.
As supervisors, we have similar challenges in monitoring and evaluating the effectiveness of corporate governance, compliance, and internal controls in financial institutions. Further, as risk exposures change, we need to modify the capital rules for banking organizations to better reflect the diversity of their risk exposures.