It brought to the centre stage the importance of internal controls, corporate governance and risk management in ensuring the resilience of financial institutions to risks and shocks. The above developments have meant that the risk management challenge for banks has been steadily growing more complex over the last two to three decades.
These developments have brought forth a fundamental shift in the approach to risk management. Risk management practices earlier were primarily informal and relatively simple. They were largely based on intuition and the techniques employed were primitive. Risk management in recent years has transited to a different animal – one that is complex and necessitates the use of sophisticated technology.