One of the first in-depth 鈥榠nsider鈥� studies of the financial crisis has blamed 鈥榟uman鈥� failings for the meltdown and called for urgent reforms to prevent a repeat.

A report by an influential group at Nottingham University Business School has revealed industry figures place little emphasis on economic and market factors when asked to explain the collapse.

Instead they believe a dangerous risk culture 鈥� brought about by regulatory and management weaknesses and poor communication 鈥� was at the heart of the turmoil.

The study鈥檚 findings are based on interviews with senior risk-management professionals and a subsequent roundtable discussion by a panel of industry experts.

Research author Dr Simon Ashby, an Associate Professor of Financial Services in the Financial Services Research Forum, said: 鈥淓very new report on the crisis seems to emphasise different priorities. But one problem with many of these reports is that they鈥檙e produced by outsiders looking into the financial services sector rather than insiders looking out.

鈥淚t might be argued insiders have made such a mess of the system that they shouldn鈥檛 have a strong voice in the debate, but this overlooks a valuable perspective. The fact is that many institutions chose not to participate in the excessive risk-taking that preceded the crisis and so have as much right to comment as anyone.鈥�

The forum is widely regarded as the UK鈥檚 most inclusive body for furthering the understanding of financial behaviour. It is unique in bringing together all stakeholder groups, including regulators and government, to inform policymakers in the public, private and voluntary sectors.

Its research identified 鈥渉uman and social factors鈥� 鈥� particularly weaknesses in risk management on the part of institutions and regulators alike 鈥� as key to the crisis.

One risk manager told researchers: 鈥淚t鈥檚 human behaviour. Everything else 鈥� governance, culture, capacity 鈥� comes off the back of that. It all comes back to the person.鈥�

Another said: 鈥淭he culture of the whole organisation was sales-driven. The risk people weren鈥檛 rewarded 鈥� there was no incentive for them to stand up and challenge.鈥�

Those questioned also criticised the role of regulators in encouraging a 鈥渂ox-ticking approach鈥� that did nothing to incentivise the effective management of risk.

One said: 鈥淩egulators might have great theoreticians, but what they absolutely need is people who know how real life works. That鈥檚 where they fall down.鈥�

Another added: 鈥淩egulators don鈥檛 really get what鈥檚 going on beneath the surface. They鈥檙e not streetwise enough and don鈥檛 understand some of the people aspects.鈥�

The report also challenges the notion that reforms such as greater capital requirements or caps on bonuses and payments might help prevent a future crisis.

Dr Ashby said: 鈥淐apital shouldn鈥檛 be regarded as the be-all and end-all. It鈥檚 just one of the many tools that can be used to control the effects of major loss events. To believe greater capital requirements will solve the problem is like encouraging motorists to fit bigger airbags rather than urging them to be safer drivers.

鈥淎s for bonuses, the issue is more complicated than simply blaming the crisis on 鈥榞reedy鈥� bankers. High levels of compensation aren鈥檛 necessarily a bad thing. It鈥檚 the rules of the game that were at fault. Incentives arrangements were short-term and sales-driven, which encouraged senior management to take excessive risks.

鈥淏onuses should be awarded over longer-term performance horizons, aligned with risk-management and governance policies and reinforced by a strong risk culture.鈥�

The report recommends sweeping changes in risk culture, including improved training, heightened awareness at board level and greater transparency for stakeholders.

Dr Ashby, who is also associate professor in the School of Management at Plymouth Business School, said: 鈥淭he global financial crisis was ultimately caused by management weaknesses.

鈥淎s such, it could have been prevented 鈥� and if the right changes aren鈥檛 made now to make financial institutions more reliable then a similar crisis could well happen again.鈥�

Forum Director Joanne Hindle said the study and its findings were deliberately 鈥減ractitioner-focused鈥� and intended to help map out a way forward for the industry.

She said: 鈥淥ur recommendations are designed to ensure lasting change while still giving financial institutions the necessary freedom for innovation and growth.

鈥淩isk management should be viewed as a mechanism for supporting business decisions rather than as costly red tape. There has to be a more strategic focus.鈥�