Risk management model balancing financial priorities of the bank with safety of the enterprise
Risk management model balancing financial priorities of the bank with safety of the enterprise

Summary/Abstract: Banks are focused mainly on their own financial goals rather than the safety of the customers. We think that balancing both financial results of the bank with stability of the enterprise delivers higher efficiency of the bank in the long term. This approach demands change in the bank’s risk management approach. We hypothesize that the asymmetry of information, between the bank and enterprise, due to the different models used for risk assessment of the same object (project), contributes to the risk-shifting from bank to the enterprise. This results in no balance between bank’s profits and enterprise safety. To reduce this deficit, we developed the Inter-Organizational Risk Management Model (IRMM) based on the agency relationship between the bank and enterprise. Finally, we present the assumptions, mainframe, structure and theoretical base for the construction of the IRMM model.

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