The Evolving Landscape of Risk: A Study of Banking Governance and Stability

Jivesh Bhutani; Sapna Gandhi

doi:10.65301/iitm.2026.17.1.5

Articles Volume 17 Issue 1 Jan - June 2026

DOI 10.65301/iitm.2026.17.1.5

The Evolving Landscape of Risk: A Study of Banking Governance and Stability

Authors

Student, Department of Management, Institute of Information Technology & Management, New Delhi Assistant Professor, Department of Management, Institute of Information Technology & Management, New Delhi

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Published 2026-07-22

Pages 71-86

Abstract

Risk management is an essential component of banking, serving both as a safeguard against financial instability and a strategic tool for maximizing shareholder value. This paper explores risk perception in banking, common misconceptions about risk management, the importance of calculated risk taking, and the interplay between risk controls, corporate governance, and business culture. This paper also explores how financial institutions define and assess their risk appetite, balancing internal and external risk factors to maintain financial stability through effective risk governance. It places particular emphasis on the influence of regulatory frameworks, credit ratings, and market conditions in shaping risk management strategies. Additionally, the paper highlights the critical role of corporate governance in risk oversight, focusing on the responsibilities of governing bodies, risk committees, and financial institutions in mitigating risks while fostering sustainable growth.

Keywords

Risk Management Risk Governance Corporate governance Risk Appetite Financial Stability Regulatory Framework Sustainable Banking

References

Basel Committee on Banking Supervision. (2017). Basel III: Finalising Post-Crisis Reforms. Bank for International Settlements (BIS). https://www.bis.org/bcbs/basel3.htm
Hull, J. C. (2018). Risk Management and Financial Institutions (5th ed.). Wiley.
Saunders, A., & Cornett, M. M. (2018). Financial Institutions Management: A Risk Management Approach. McGraw-Hill Education.
Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance, and the Theory of Investment. American Economic Review, 48(3), 261–297.
Merton, R. C. (1974). On the Pricing of Corporate Debt: The Risk Structure of Interest Rates. The Journal of Finance, 29(2), 449–470.
Allen, L., & Santomero, A. M. (1997). The Theory of Financial Intermediation. Journal of Banking & Finance, 21(11–12), 1461–1485.
Schroeck, G. (2002). Risk Management and Value Creation in Financial Institutions. Wiley.
Mishkin, F. S. (2006). How Big is a Problem is Too Big to Fail? Journal of Economic Perspectives, 16(4), 83–102.
Diamond, D. W., & Dybvig, P. H. (1983). Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy, 91(3), 401–419.
Laeven, L., & Levine, R. (2009). Bank Governance, Regulation, and Risk Taking. Journal of Financial Economics, 93(2), 259–275.
Mehran, H., Morrison, A., & Shapiro, J. (2011). Corporate Governance and Banks: What Have We Learned from the Financial Crisis? Federal Reserve Bank of New York Staff Reports, 502.
Financial Crisis Inquiry Commission. (2011). The Financial Crisis Inquiry Report. U.S. Government Printing Office.
Acharya, V. V., & Richardson, M. (2009). Restoring Financial Stability: How to Repair a Failed System. Wiley.
Tarullo, D. K. (2008). Banking on Basel: The Future of International Financial Regulation. Peterson Institute for International Economics.
Claessens, S., & Kodres, L. (2014). The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions. IMF Working Papers, 14/46.

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How to Cite

Jivesh Bhutani, Sapna Gandhi . (2026). The Evolving Landscape of Risk: A Study of Banking Governance and Stability. IITM Journal of Management and IT, 17(1), 71-86.

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[1] Basel Committee on Banking Supervision. (2017). Basel III: Finalising Post-Crisis Reforms. Bank for International Settlements (BIS). https://www.bis.org/bcbs/basel3.htm

[2] Hull, J. C. (2018). Risk Management and Financial Institutions (5th ed.). Wiley.

[3] Saunders, A., & Cornett, M. M. (2018). Financial Institutions Management: A Risk Management Approach. McGraw-Hill Education.

[4] Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance, and the Theory of Investment. American Economic Review, 48(3), 261–297.

[5] Merton, R. C. (1974). On the Pricing of Corporate Debt: The Risk Structure of Interest Rates. The Journal of Finance, 29(2), 449–470.

[6] Allen, L., & Santomero, A. M. (1997). The Theory of Financial Intermediation. Journal of Banking & Finance, 21(11–12), 1461–1485.

[7] Schroeck, G. (2002). Risk Management and Value Creation in Financial Institutions. Wiley.

[8] Mishkin, F. S. (2006). How Big is a Problem is Too Big to Fail? Journal of Economic Perspectives, 16(4), 83–102.

[9] Diamond, D. W., & Dybvig, P. H. (1983). Bank Runs, Deposit Insurance, and Liquidity. Journal of Political Economy, 91(3), 401–419.

[10] Laeven, L., & Levine, R. (2009). Bank Governance, Regulation, and Risk Taking. Journal of Financial Economics, 93(2), 259–275.

[11] Mehran, H., Morrison, A., & Shapiro, J. (2011). Corporate Governance and Banks: What Have We Learned from the Financial Crisis? Federal Reserve Bank of New York Staff Reports, 502.

[12] Financial Crisis Inquiry Commission. (2011). The Financial Crisis Inquiry Report. U.S. Government Printing Office.

[13] Acharya, V. V., & Richardson, M. (2009). Restoring Financial Stability: How to Repair a Failed System. Wiley.

[14] Tarullo, D. K. (2008). Banking on Basel: The Future of International Financial Regulation. Peterson Institute for International Economics.

[15] Claessens, S., & Kodres, L. (2014). The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions. IMF Working Papers, 14/46.