Governance, risk management and compliance practices within Maltese credit institutions

Abstract

In light of the recent banking crisis and the continuous development of financial regulations, a new school of thought prescribing an integrated approach towards Governance, Risk Management and Compliance (GRC) has emerged. This dissertation explores whether Maltese credit institutions have embarked on these challenges and whether they understand the rationale underlying this holistic effort. The study outlines credit institutions' internal practices in comparison to a number of fundamental principles proposed in the GRC Model by the Open Compliance and Ethics Group (OCEG). Moreover, the study determines the involvement of front offices within local institutions. The answers to the research questions were obtained through an empirical study that gathers data by means of face-to-face structured interviews. Interviews were conducted with senior management personnel that held roles in the areas of risk management, compliance or internal audit. Additionally, where applicable, a couple of questions were also extended to front liners. The results acquired indicate that Maltese credit institutions are partly aligned with most of the practices proposed in this study even though the majority is not aware of the GRC model and its consequent competitive advantage. However, communication with the front office needs to be enhanced in order for institutions to fully support a collective awareness towards governance, risk management and compliance. Finally, the researcher came up with a number of recommendations that can further mitigate the gap between local institutions' current internal practices and those proposed in the GRC model by OCEG.