The Strategic Role of Risk Management in Enhancing Banking Stability and Investor Confidence

Abstract

The banking sector plays a fundamental and strategic role in maintaining macroeconomic stability and attracting investor confidence through the implementation of effective and comprehensive risk management practices. This study aims to review and analyze the relationship between banking risk management, investment efficiency, and investor perception by employing a systematic literature review approach covering the specified research period. The analysis reveals that the implementation of Enterprise Risk Management, supported by strong risk governance frameworks and transparent financial reporting, significantly contributes to improving investor confidence and ensuring the stability of banking investments. Furthermore, the digitalization of the financial sector and the integration of sustainability policies have strengthened risk management systems by enhancing operational efficiency, improving market risk mitigation strategies, and reinforcing credit risk control mechanisms. These developments indicate that risk management in the banking industry is no longer limited to compliance functions but has evolved into a strategic instrument that supports decision-making, competitiveness, and long-term financial resilience. Therefore, the effectiveness of risk management is identified as a key determinant in maintaining investor trust, promoting responsible financial practices, and ensuring the sustainable growth and stability of the global banking sector.