The assessment of risk management system’s economic efficiency in retail banking

Abstract

The banking risk management is always a relevant topic in financial sector’s academic literature, but the detailed analysis of current studies showed that there is a lack of studies in risk management’s economic efficiency assessment in retail banking, where the risk management system’s administration cost may be a significant part of total credit institution’s cost. The scientific problem of this article is: how the economic efficiency of retail banking risk management system could be defined and assessed? To reach the aim, the risk management’s economic efficiency concept in retail banking is discussed and the risk management system development relevance in the context of economic efficiency is analyzed. The results of research allows concluding that the change of risk management system’s economic efficiency might be expressed as net benefit of risk management, which shows the difference between the change of risk cost and the change of risk management system’s administration cost. The research presented in the article allows stating that the gross and net benefit of the change of risk management system could be used as universal rates of the economic efficiency of the banking risk management that include all factors associated with banking risk management system.