Abstract:

Risk is the main cause of uncertainty in any banking industry. Thus, banks increasingly focus on identifying risks and managing them before they even affect the investor. The ability to manage risk will help banks make confident decisions that impact the future of the business. Their knowledge of the risks they are facing will give them various options on how to deal with potential problems. Risk management is the process of identifying possible risks, problems, or disasters before they happen. This allows bankers to set up procedures to avoid the risk, minimize its impact, or at the very least help cope with its impact. A bank should make a realistic evaluation of the true level of risk and plan accordingly. The banking industry is one of the riskiest industries. Many countries and international organizations have come out with rules and regulations regarding risk management. In the case of Malaysia, risk governance guideline was introduced on 1st of March 2013 and has been effective since then. However, the banks are given additional time to bring the existing practices and policies in line with the principles provided in risk governance guidelines. There might be a possibility that some of the banks might delay complying immediately due to the flexibility in the time given by the governing body.  Furthermore, to the extent of our knowledge, no research has been conducted on risk governance practices of banks in Malaysia. Thus, it is necessary to find out the awareness, compliance, practices, and effectiveness of risk governance guidelines in the banking industry of Malaysia.