ABSTRACT
A critical explanation for the 2008 global financial crash was excessive and uncontrolled risk-taking by large systemically important financial institutions. This chapter builds on and tests Power's extensive work empirically by revealing the politics, culture and psychology of risk management, in a significant corporate setting. Given the paucity of this type of research and analysis in the financial risk literature, the findings help us to understand the practical nuances of risk and the critical role of power and culture in determining which risks are measured and managed, which are ignored and which are manipulated and subverted. It uses subtle approaches to get the data and probe into the political conflicts to understand the realpolitik of financial risk management. The chapter also examines the independent risk governance architecture – non-executive directors, auditors and regulators, to analyse its methods and effectiveness. Finally, it examines the political and economic climate prevailing at that time and its influence on risk appetite and behaviour.
