Performance management system and enterprise risk management : the case of investment banking industry

The investment banks have operated in one of the most dynamic, fast-paced and challenging industries in the world. However, many scandals and management fiascos have scarred the investment banks’ reputation in the past years. From the recent financial crisis, which impacted the whole world economy, to the JP Morgan trading loss, which cost the bank $6.2 billion, the industry’s executives have being questioned and challenged if they can control and manage these institutions. A possible solution for these problems might reside in better performance and risk management practices. Thus, this work aims at analyzing the current Performance Management System and Enterprise Risk Management practices in the industry, developing a diagnostic of these systems, thereupon proposing improvements for them that can lead to better management practices. To sustain this analysis, two case studies were conducted, one in an Italian and the other in a Brazilian bank. The main findings are the presence of developed risk management systems, especially in the quantitative metrics; and performance systems strongly focused on financial metrics, which provide many opportunities for improvements in this area and for the decision making process of these institutions.