Internal Control, Credit Institutions, Risk Management, Corporate Culture, Risk Return Ratio, Governance, Compliance, Basel II, Value at Risk, VaR
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Abstract
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Abstract
Internal control is crucial for credit institutions to manage risks and ensure good governance. It prevents risk and improves the risk-return ratio.
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[...] In fact, the internal control function is an important tool in the good functioning of the interactivity between the general management function and the board of directors of credit institutions.2. In fact, if the internal control is, as a whole, under the control of the general manager, the latter is subject to a third-level control materialized by the internal audit, which is directly attached to the board of directors and / or the president of the institution. In this regard, the implementation of an internal control must be seen as an opportunity to improve the management of the credit institution. [...]
[...] Risk prevention made possible by an effective internal control The internal control devices exist, above all, to meet three different needs that are: - The inevitable drift of practices within an enterprise that is characterized by a progressive and gradual abandonment of the steps and obligations defined in the procedure corpus, which are considered obsolete or ineffective by operational functions. - The management of the various risks inherent to the practices of an organization. These risks are of various orders (regulatory, legal, operational, financial, etc.1.) and can represent a particularly high cost for the credit institution. - The elements related to the development of information systems, particularly in relation to the necessary quality of the data that circulates in them. [...]
[...] To what extent is the implementation of internal control an opportunity for credit institutions? Table of Contents Introduction 2 I. Internal control as a guarantee of good risk management and good application of the company's management directives 2 A. Prevention of risks allowed by an effective internal control 2 B. The guarantee of good follow-up of the guidelines provided by the credit institution's management 2 II. An operational support tool, internal control as a factor of improvement of the risk / return ratio and dissemination of control culture 3 A. [...]
[...] Internal control: opportunity for improvement of the efficiency of operational functions Furthermore, internal control appears as an important opportunity for credit institutions when leaving an analysis prism that relies strictly on return and using, in its place, the risk / return ratio4. Internal control and its exercise allow, within credit institutions, to move from a return logic to an assessment of profitability in relation to risk. This change in method aims to better integrate the concept of risk into investment decision-making and this, throughout the credit institution's decision-making chain. This approach is reflected, for example, in the establishment of credit risk limits but also, for example, by setting VaR limits5 (Value at Risk) for proprietary trading operations. B. [...]
[...] The term refers to the ability of an institution to integrate the needs of internal control into its corporate culture and thus to mitigate the vicissitudes and drifts inherent in its development in order to ensure harmonious growth and good risk-return ratio performance. The development of a risk culture is thus one of the consequences of the implementation and reinforcement of internal control. As a manager, it seems interesting to allow a rotation of staff on the control function. This technique thus allows to strengthen the control function by allowing a concrete knowledge of the operational functions by the people in charge of internal control but also to strengthen the acceptance of internal control. [...]
