IDEAS home Printed from https://ideas.repec.org/a/eme/jrfpps/15265941011043639.html
   My bibliography  Save this article

The growing importance of risk in financial regulation

Author

Listed:
  • Marianne Ojo

Abstract

Purpose - The purpose of this paper is not only seek to trace developments that have contributed to the importance of risk in regulation, but also to justify why risk has become so significant within regulatory and governmental circles. Design/methodology/approach - This task will be facilitated through a consideration of theories associated with risk, and by reference to two forms of risk regulation, namely risk‐based regulation and meta regulation. As well as a consideration of the application of both in jurisdictions such as the UK, the paper adopts a comparative approach through references to the their application in jurisdictions such as Germany, Italy, and the USA, and also through a comparison between meta‐regulatory strategies and risk‐based regulation. Findings - This paper concludes that all regulatory strategies should take into consideration the importance of management responsibilities – both on individual and corporate levels. Meta‐risk regulation has not only assumed such a prominent position in regulation through its application in Basel II, but also is preferred to risk‐based regulation – not only because of the element of ambiguity which risk‐based regulation introduces into its assessment (through a consideration of the external environment of the firm), but also because of its impact of the use of external auditors in regulation and supervision. Practical implications - The practical implications of a move towards risk‐based regulatory strategies, and meta‐regulatory strategies in particular, is that courts are simply not adequately equipped to deal with the pace with which some financial instruments, such as derivatives, operate. Originality/value - This paper not only introduces originality through its comparative approach and the choice of jurisdictions involved, but also through the attention it draws to the need for more innovative techniques such as meta regulation. Meta regulation can be considered to be the most evolved and collaborative form of regulation, which is best suited for such an ever‐evolving and changing regulatory environment that currently exists.

Suggested Citation

  • Marianne Ojo, 2010. "The growing importance of risk in financial regulation," Journal of Risk Finance, Emerald Group Publishing Limited, vol. 11(3), pages 249-267, May.
    • Handle: RePEc:eme:jrfpps:15265941011043639
    DOI: 10.1108/15265941011043639
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/15265941011043639/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/15265941011043639/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/15265941011043639?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marco Moscadelli, 2004. "The modelling of operational risk: experience with the analysis of the data collected by the Basel Committee," Temi di discussione (Economic working papers) 517, Bank of Italy, Economic Research and International Relations Area.
    2. Parker,Christine, 2002. "The Open Corporation," Cambridge Books, Cambridge University Press, number 9780521818902, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ojo, Marianne, 2009. "The Growing Importance of Risk in Regulation," MPRA Paper 13723, University Library of Munich, Germany.
    2. Stefan Mittnik & Sandra Paterlini & Tina Yener, 2011. "Operational–risk Dependencies and the Determination of Risk Capital," Center for Economic Research (RECent) 070, University of Modena and Reggio E., Dept. of Economics "Marco Biagi".
    3. Marco Rocco, 2011. "Extreme value theory for finance: a survey," Questioni di Economia e Finanza (Occasional Papers) 99, Bank of Italy, Economic Research and International Relations Area.
    4. Robert Jarrow & Jeff Oxman & Yildiray Yildirim, 2010. "The cost of operational risk loss insurance," Review of Derivatives Research, Springer, vol. 13(3), pages 273-295, October.
    5. J. Christopher Westland, 2015. "Economics of eBay’s buyer protection plan," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 1(1), pages 1-20, December.
    6. Braithwaite, John, 2006. "Responsive regulation and developing economies," World Development, Elsevier, vol. 34(5), pages 884-898, May.
    7. S�verine Plunus & Georges Hübner & Jean-Philippe Peters, 2012. "Measuring operational risk in financial institutions," Applied Financial Economics, Taylor & Francis Journals, vol. 22(18), pages 1553-1569, September.
    8. Ikefuji, Masako & Laeven, Roger J.A. & Magnus, Jan R. & Muris, Chris, 2020. "Expected utility and catastrophic risk in a stochastic economy–climate model," Journal of Econometrics, Elsevier, vol. 214(1), pages 110-129.
    9. Lu, Zhaoyang, 2011. "Modeling the yearly Value-at-Risk for operational risk in Chinese commercial banks," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 82(4), pages 604-616.
    10. Rob Imrie & Emma Street, 2009. "Risk, Regulation and the Practices of Architects," Urban Studies, Urban Studies Journal Limited, vol. 46(12), pages 2555-2576, November.
    11. Jodi L. Short & Michael W. Toffel & Andrea R. Hugill, 2016. "Code Contingencies: Designing Monitoring Regimes to Promote Improvement in Supply Chain Working Conditions," Harvard Business School Working Papers 17-001, Harvard Business School, revised Mar 2019.
    12. Luc Brès & Sébastien Mena & Marie‐Laure Salles‐Djelic, 2019. "Exploring the formal and informal roles of regulatory intermediaries in transnational multistakeholder regulation," Regulation & Governance, John Wiley & Sons, vol. 13(2), pages 127-140, June.
    13. Ingo Pies & Philipp Schreck & Karl Homann, 2021. "Single-objective versus multi-objective theories of the firm: using a constitutional perspective to resolve an old debate," Review of Managerial Science, Springer, vol. 15(3), pages 779-811, April.
    14. Giuseppe Galloppo & Alessandro Rogora, 2011. "What Has Worked In Operational Risk?," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 5(3), pages 1-17.
    15. Pflug Georg Ch. & Schaller Peter, 2009. "A note on pivotal Value-at-Risk estimates," Statistics & Risk Modeling, De Gruyter, vol. 27(3), pages 201-209, December.
    16. Stefan Aulbach & Verena Bayer & Michael Falk, 2012. "A multivariate piecing-together approach with an application to operational loss data," Papers 1205.1617, arXiv.org.
    17. Mainik Georg & Rüschendorf Ludger, 2012. "Ordering of multivariate risk models with respect to extreme portfolio losses," Statistics & Risk Modeling, De Gruyter, vol. 29(1), pages 73-106, March.
    18. Gambacorta, Leonardo, 2008. "How do banks set interest rates?," European Economic Review, Elsevier, vol. 52(5), pages 792-819, July.
    19. Sanne R. Van Duin & Henri C. Dekker & Jacco L. Wielhouwer & Juan P. Mendoza, 2018. "The Tone from Above: The Effect of Communicating a Supportive Regulatory Strategy on Reporting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 56(2), pages 467-519, May.
    20. Benjamin Van Rooij & Adam Fine, 2018. "Toxic Corporate Culture: Assessing Organizational Processes of Deviancy," Administrative Sciences, MDPI, vol. 8(3), pages 1-38, June.

    More about this item

    Keywords

    Regulation; Risk; Finance; Auditing;
    All these keywords.

    JEL classification:

    • K2 - Law and Economics - - Regulation and Business Law

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jrfpps:15265941011043639. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.