Essays on instituting internal audit and risk management in banks

La recente crisi finanziaria del 2007-08 ha rappresentato un momento spartiacque nella storia del settore bancario. L'evento senza precedenti ha indotto il rigido scrutinio da parte di governi, regolatori e organismi deputati alla definizione di standard sulla gestione del business bancario. Come risultato del rigido scrutinio, si sono susseguite globalmente un'ampia varietà di riforme, volte alla seconda (gestione del rischio) e terza (internal audit) linea di difesa. Queste riforme hanno coinvolto una varietà di attori, influenzando non soltanto le istituzioni deputate alla definizione degli standard per la gestione del rischio e l'internal audit, ma anche l'implementazione di tali standard all'interno delle banche. Motivata da questi eventi contemporanei, la tesi esamina le istituzioni e l'implementazione della seconda e terza linea di difesa nel settore bancario. Attraverso tre studi empirici di tipo esploratorio, la tesi offre due importanti contributi. In primo luogo, evidenzia le mutevoli nozioni di misure del rischio e internal audit nel settore bancario. Più specificatamente, la tesi (nel Paper II) mostra come la mancata convergenza delle pratiche per la gestione del rischio operativo forzi il regolatore a cambiare l'attività e l'approccio orientato ai dettagli delle misure di rischio, che (inintenzionalmente) hanno consentito alla variazione di prosperare. In modo analogo, la tesi (nel Paper III) mostra come l'estenzione dell'internal audit al dominio non tangibile del “cultura del rischio” aumenti i dubbi inerenti le nozioni di "verificazione" e "controllo" associate alle pratiche di internal audit. In secondo luogo, i risultati mostrano i differenti approcci partecipativi dei vari stakeholder nella trasformazione della seconda e della terza linea di difesa. Dunque, la tesi (nel Paper I) dimostra la separazione e il mix delle informazioni tecniche e della retorica politica dei diversi stakeholder nell'istituzione degli standard per la gestione del rischio di liquidità. In merito al problema di internal audit dei modelli di rischio Basilea (nel Paper IV), la tesi dimostra gli approcci di filtraggio delle molteplici richieste istituzionali da parte delle condizioni organizzative interne, che abilitano la completa o parziale agenzia degli internal auditor di livello inferiore. Considerando i risultati, la tesi rivela due importanti implicazioni per i practitioner. In primo luogo, i risultati della tesi indicano che le riformulazioni della gestione del rischio e dell'internal audit richiedano che gli organismi deputati alla definizione degli standard, i regolatori e i practitioner definiscano un equilibrio tra cosa debba essere controllato e chi vada responsabilizzato. In secondo luogo, le organizzazioni devono progettare attentamente il livello di libertà da dare alle funzioni di internal audit e ai team di controllo del rischio, e come gestire le complesse domande istituzionali per mezzo della struttura organizzativa e delle iniziative di skilling.The recent financial crisis of 2007-08 was a watershed moment in the history of banking. The unprecedented event caused severe scrutiny by governments, regulators and standard setters on how the business of banking is run. As a result of the strict scrutiny, a wide variety of reforms aimed at the second (risk management) and third (internal audit) line of defense ensued globally. These reforms involved a variety of actors and not only affected the institution of risk management and internal audit standards, but also their implementation in banks. Motivated by these contemporary events, this thesis examines the institution and implementation of the second and third line of defense in the banking sector. Through the three exploratory field studies, the thesis posits two important contributions. First, the thesis highlights the changing notions of risk measurement and internal audit in the banking sector. More specifically, the thesis (in Paper II) shows how non-convergence of operational risk practices forced regulators to change their activity and detail oriented advanced approach of risk measurement that (unintentionally) allowed the variation to flourish. In a similar vein, the thesis (in Paper III) demonstrates how the extension of internal audit to the non-tangible domain of “risk culture” raises doubts on the notion of “verification” and “control” attached to the practices of internal audit. Second, the findings indicate the different participation approaches of various stakeholders in the transformation of the second and third line of defense. Here, the thesis (in Paper I) demonstrates the separation and mixing of technical information and political rhetoric by the different stakeholders in instituting the liquidity risk standards. On the issue of internal audit of the Basel risk models (in Paper IV), the thesis demonstrates the filtering approaches of multiple institutional demands by the internal organizational conditions that enable full or partial agency of low-level internal auditors. Given the findings, the thesis explicates two important implications for practitioners. First, the findings of the thesis indicate that reformulations of risk management and internal audit would require standard setters, regulators, and practitioners in understanding a balance between what to control and whom to empower. Second, organizations need to carefully design what level of freedom to be given to internal audit and risk control teams and how to manage complex institutional demands through organizational structure and skilling initiatives.DIPARTIMENTO DI INGEGNERIA GESTIONALE29ARNABOLDI, MICHELATRUCCO, PAOL

(SI13-09) Numerical Methods for Solving Nonlinear Fisher Equation using Backward Differentiation Formula

This paper examines the numerical solution of the nonlinear Fisher equation that is used to find the growth of tumour cells in the brain. By employing new methods that transform nonlinear partial differential equations (PDE) into nonlinear ordinary differential equations (ODE) through spatial discretization. The stability of the resulting nonlinear system is evaluated using Lyapunov’s criteria. Implicit stiff solvers, including various orders of backward differentiation formulas, are used to address the ODE system. The efficiency of these numerical methods is demonstrated through two examples, and a comparison with existing methods from the literature is conducted. Compared to traditional methods, the proposed numerical techniques are distinguished by their simplicity, precision, and remarkable efficiency

Discretion in the Governance Work of Internal Auditors: Interplay Between Institutional Complexity and Organizational Embeddedness

This study examines which factors facilitate (obstruct) the discretion exercised by ground-level governance actors, such as internal auditors, in justifying their governance work. To achieve this objective, we rely on two complementary theoretical perspectives. One perspective proposes that the organizational embeddedness of ground-level governance actors, ordained by high-level governance actors (such as the board of directors), obstructs their discretion. In contrast, the other perspective, building on institutional complexity, propounds that multiple institutional demands facilitate the situated agency and discretion of ground-level governance actors. Consistent with the emerging multilevel research on institutional complexity, we combine these two perspectives by including both the structural and static meso-level factors (i.e. organizational embeddedness) as well as actors' situated agency. Utilizing three comparative cases, we demonstrate that internal auditors' ability to exercise discretion is facilitated (obstructed) when organizational embeddedness enables (constrains) the cohabitation of multiple institutional logics at the organizational level. In doing so, we identify organizationally situated agency as an underlying factor driving internal auditors’ justification approaches in their governance work

Manifold Conceptions of the Internal Auditing of Risk Culture in the Financial Sector

This exploratory study investigates the manifold conceptions of the internal auditing (IA) of risk culture prevalent among four influential actors of the financial sector—regulators, normalizers, consultants, and implementers. By inductive analysis of 20 interviews and 295 documents, we illustrate a two-step interpretive scheme utilized by the four actors in their IA approaches of risk culture: defining broad goals and designing visibility schemes. The visibility schemes were tied to the demarcation, measurement, as well as the IA data collection techniques of risk culture. Our results indicate two dichotomous interpretations among the four actors concerning the IA of risk culture. The first interpretation, prevalent among regulators and implementers, promotes the control of risk culture primarily through verification. The second interpretation, adopted by consultants and normalizers, promotes the control of risk culture by IA along with the empowerment of employees through training programs. Our results not only contribute to understanding IA expansions, specifically to non-tangible domains such as risk culture but also enrich the literature exploring the mechanisms different stakeholders utilize to shape weakly professionalized IA practices

Sustainability trade-offs in the circular economy: a maturity-based framework

The theoretical and practical understanding of sustainability implementation has been changing in depth and scope. In particular, circular economy paradigms (e.g., Cradle to Cradle or “C2C” practices) have enabled firms to rethink their resource management behavior, resulting in distinct trade-off patterns among different sustainability dimensions. Furthermore, while many established firms remain reactive and market-oriented in their sustainability implementations, sustainability-rooted firms proactively integrate sustainability practices into their core business. The prior literature on sustainability trade-offs has unduly focused more on established firms that predominantly indulge in market-oriented decisions and trade-offs between profit and sustainability, lacking insights into the approaches adopted by sustainability-rooted firms and trade-offs among the different dimensions of sustainability. We performed a mixed-methods study to address this gap and illustrated the rationale and dynamics of trade-offs among five sustainability dimensions (i.e., material health, material reutilization, renewable energy, water stewardship, and social fairness). We primarily focused on firms in the United States and the European Union since they are the leading areas in terms of circular economy adoption. We explained the pattern of sustainability trade-offs and associated them with a three-stage maturity framework, namely, low-hanging fruits, exploratory, and resource and time intensive. We contributed to the theory by depicting the influence of resource allocation and sustainability maturity level on trade-offs among the five dimensions of sustainability. Practitioners can leverage our framework to better understand their sustainability transformation and make more informed decisions for attaining higher levels of sustainability with more impact

EFFECT OF INM PRACTICE ON PLANT GROWTH, FRUIT YIELD AND YIELD ATTRIBUTES IN CHILLI (CAPSICUM ANNUUM L.)

ABSTRACT

Zakończona powodzeniem przezskórna interwencja wieńcowa z zastosowaniem techniki Szabo w przypadku zmian aortalno-ostialnych z przewlekłym całkowitym zamknięciem prawej tętnicy wieńcowej

Percutaneous coronary intervention (PCI) in aorto-ostial lesions with chronic total occlusion is one of the most challenging scenarios, because geographic miss may lead to a higher rate of immediate and late adverse events when comparing with non-ostial lesions. Here we report a case, where aorto-ostial chronic total occlusion of right coronary artery in a 39-year-old male was successfully recanalised and perfectly stented using the Szabo technique

Effect of participatory women's groups facilitated by Accredited Social Health Activists on birth outcomes in rural eastern India: A cluster-randomised controlled trial

Background: A quarter of the world's neonatal deaths and 15% of maternal deaths happen in India. Few community-based strategies to improve maternal and newborn health have been tested through the country's government-approved Accredited Social Health Activists (ASHAs). We aimed to test the effect of participatory women's groups facilitated by ASHAs on birth outcomes, including neonatal mortality. Methods: In this cluster-randomised controlled trial of a community interve

Community mobilisation with women's groups facilitated by Accredited Social Health Activists (ASHAs) to improve maternal and newborn health in underserved areas of Jharkhand and Orissa: study protocol for a cluster-randomised controlled trial

Background: Around a quarter of the world's neonatal and maternal deaths occur in India. Morbidity and mortality are highest in rural areas and among the poorest wealth quintiles. Few interventions to improve maternal and newborn health outcomes with government-mandated community health workers have been rigorously evaluated at scale in this setting.The study aims to assess the impact of a community mobilisation intervention with women's groups facilitated by ASHAs to improve maternal and newborn health outcomes among rural tribal communities of Jharkhand and Orissa.Methods/design: The study is a cluster-randomised controlled trial and will be implemented in five districts, three in Jharkhand and two in Orissa. The unit of randomisation is a rural cluster of approximately 5000 population. We identified villages within rural, tribal areas of five districts, approached them for participation in the study and enrolled them into 30 clusters, with approximately 10 ASHAs per cluster. Within each district, 6 clusters were randomly allocated to receive the community intervention or to the control group, resulting in 15 intervention and 15 control clusters. Randomisation was carried out in the presence of local stakeholders who selected the cluster numbers and allocated them to intervention or control using a pre-generated random number sequence. The intervention is a participatory learning and action cycle where ASHAs support community women's groups through a four-phase process in which they identify and prioritise local maternal and newborn health problems, implement strategies to address these and evaluate the result. The cycle is designed to fit with the ASHAs' mandate to mobilise communities for health and to complement their other tasks, including increasing institutional delivery rates and providing home visits to mothers and newborns. The trial's primary endpoint is neonatal mortality during 24 months of intervention. Additional endpoints include home care practices and health care-seeking in the antenatal, delivery and postnatal period. The impact of the intervention will be measured through a prospective surveillance system implemented by the project team, through which mothers will be interviewed around six weeks after delivery. Cost data and qualitative data are collected for cost-effectiveness and process evaluations

Shaping Risk Management in Banks

The recent financial crisis of 2007-08 was a watershed moment in the history of banking. The unprecedented event led to severe scrutiny by standard setters and regulators on how the business of banking is run. As a result of this strict scrutiny, a wide variety of reforms aimed at the second line of defense (risk management) ensued globally. These reforms stirred debate among the five actors (regulators, standard setters, normalizers, consultants, and implementers – banks and their interest organizations) that affected not only the shaping of risk management standards but also their implementation in banks. Motivated by these contemporary events, this thesis examines the shaping of risk management in the banking sector. Through the three exploratory field studies in Sweden and Italy, the thesis posits two important contributions. First, the thesis posits a framework, demonstrating how the dynamic shaping of risk management is changing the conceptions of risk management in the banking sector. More specifically, the thesis (in Paper I) demonstrates how the definition of liquidity was changed from its traditional notion of a match between cash inflow and outflow to managing net cash outflow demands by keeping high-quality liquid assets. Furthermore, the thesis (in Paper II) shows how non-convergence of operational risk practices forced regulators to change their activity and detail-oriented advanced approach of risk measurement that (unintentionally) allowed the variation of practices to flourish. In a similar vein, the thesis (in Paper IV) demonstrates how the extension of internal audit to the non-tangible domain of “risk culture” raises doubts about the notion of “verification” and “control” attached to the practices of internal audit in lending credibility to risk management practices. Second, the findings indicate the different participation approaches of various interested actors in the shaping of risk management practices. Here, the thesis (in Paper IV) demonstrates how the five actors (regulators, standard setters, normalizers, consultants, and implementers – banks and their interest organizations) influenced the conception of internal audit of risk culture. On the issue of internal audit of the Basel risk models (in Paper III), the thesisi demonstrates the filtering approaches of multiple institutional demands via the internal organizational conditions that enable full or partial agency of low-level internal auditors in shaping their practices of lending credibility to risk management. Given the findings, the thesis explicates two important implications for practitioners. First, the findings of the thesis indicate that reformulations of risk measurement and internal audit would require standard setters, regulators, normalizers, consultants, and implementers to understand a balance between what to control and whom to empower. Second, banks would need to carefully design the level of freedom to be given to internal audit and risk control teams in managing the complex institutional demands through organizational structure and skilling initiatives.Finanskrisen 2007–2008 blev en vattendelare i bankväsendets historia. Händelsen saknade motstycke i historien och ledde till närgående granskning av bankväsendets verksamheter. Till följd av granskningen genomfördes en mängd globala reformer inriktade på den andra försvarslinjen (riskhantering). Reformerna väckte en debatt bland de fem aktörerna (regleringsorgan, standardiseringsorgan, professionella organisationer [normalizers], konsulter och implementerare, det vill säga banker och deras intresseorganisationer) som påverkade både utformningen av standarder för riskhantering och genomförandet av dessa i banker. Med avstamp i dessa aktuella händelser undersöker avhandlingen hur riskhantering utformas i bankväsendet. Avhandlingen består av tre explorativa fältstudier i Sverige och Italien och bidrar med två viktiga punkter. För det första upprättar den ett ramverk som visar hur den dynamiska utformningen av riskhantering förändrar uppfattningar om riskhantering i bankväsendet. Mer konkret visar avhandlingen (i artikel I) hur definitionen av likviditet ändrades från att traditionellt beteckna matchning mellan kassainflöde och kassautflöde till att inbegripa hantering av kassautflödeefterfrågan genom att behålla likvida tillgångar av hög kvalitet. Avhandlingen visar även (i artikel II) hur icke-konvergerandet av operativ rikspraxis tvingade regleringsorgan att förändra sin aktivitet och sitt detaljorienterade förhållningssätt till riskhantering, som (oavsiktligt) ledde till att variationer i praxis kunde uppstå. Vidare framgår (i artikel IV) hur internrevisionens utvidgning till det immateriella (non-tangible) området ”riskkultur” väcker tvivel om begreppen ”verification” och ”control” som är knutna till praxis för internrevision med avseende på att skapa tilltro till riskhanteringspraxis. För det andra visar resultaten de olika aktörernas förhållningssätt till att delta i utformningen av praxis för riskhantering. Här framgår (i artikel IV) på vilka sätt de fem aktörerna (regleringsorgan, standardiseringsorgan, professionella organ, konsulter och implementerare) var med och påverkade uppfattningen om internrevision av riskkultur. Vad beträffar frågan om internrevision av Baselmodellerna visar avhandlingen (i artikel III) förhållningssättet att filtrera institutionella krav av interna organisatoriska villkor som ger internrevisioner på lägre nivå total eller partiell makt att utforma praxis för att skapa tilltro till riskhantering. Resultaten framhäver två viktiga följder för aktörer. För det första tyder resultaten på att omformuleringen av riskbedömning och internrevision kräver att standardiseringsorgan, regleringsorgan, professionella organisationer, konsulter och implementerare förstår balansen mellan vad som ska kontrolleras och vem som ska stärkas. För det andra behöver banker försiktigt utforma nivån av frihet som ska ges till internrevisorer och riskontrollanter för att hantera de komplexa institutionella kraven genom organisatorisk struktur och initiativ till upplärande.EDIM - European Doctorate in Industrial Managemen