Principle 1: The board of directors should take the lead in establishing a strong risk management culture, implemented by senior management. [This paper refers to a management structure composed of a board of directors and senior management. The Committee is aware that there are significant differences in legislative and regulatory frameworks across countries regarding the functions of the board of directors and senior management. In some countries, the board has the main, if not exclusive, function of supervising the executive body (senior management, general management) so as to ensure that the latter fulfils its tasks. For this reason, in some cases, it is known as a supervisory board. This means that the board has no executive functions. In other countries, the board has a broader competence in that it lays down the general framework for the management of the bank. Owing to these differences, the terms "board of directors" and "senior management" are used in this paper not to identify legal constructs but rather to label two decision-making functions within a bank.] The board of directors and senior management should establish a corporate culture guided by strong risk management, set standards and incentives for professional and responsible behaviour, and ensure that staff receives appropriate risk management and ethics training.

14. Banks with a strong culture of risk management and ethical business practices are less likely to experience damaging operational risk events and are better placed to effectively deal with those events that occur. The actions of the board of directors and senior management as well as the bank's risk management policies, processes and systems provide the foundation for a sound risk management culture.