A1375
Title: Risk culture indicators and their role in financial institutions resilience
Authors: Natalie Packham - Berlin School of Economics and Law (Germany) [presenting]
Sami Alkhoury - HWR Berlin (Germany)
Abstract: A strong risk culture is generally thought to be valuable to a financial institution as it is said to strengthen an institution's resilience. Can this claim be substantiated? The purpose is to establish quantitative and qualitative risk culture indicators (RCIs) and, using a data set comprising 81 European banks, build a score for risk culture and a stress test score. A relatively better result is found in the 2014 ECB stress test, which corresponds to a better risk culture. Revisiting this problem in the age of generative AI and NLP, it is shown how to build a comprehensive set of risk culture scores from financial institutions' annual reports by training a variety of NLP models. This involves, in particular, reinforcement learning from human feedback (RLHF), which increases the quality of automatically generated RCIs.
