A Renewed Focus on Risk

In the wake of the current financial crisis, many changes will need to occur to strengthen management practices and to provide stability to corporate performance.  A prediction for one such change was offered in this week's edition of Compliance Week.  Stephen Davis and Jon Lukomnik believe that the discussion in many boardrooms will change in dramatic ways - and for the better.  Here's what they had to say.

Strategy re-enters the boardroom, through the risk door. After a decade in which directors have at times felt like compliance cops, they’re probably not looking forward to what some have called their new role: risk regulation. But calls for “risk committees,” for dedicated risk expertise in the boardroom, for linking executive compensation to risk taking, and for comprehensive enterprise risk management programs, will be welcomed in hindsight. Why? Because determining the appropriate risk profile for a company is fundamentally a strategic planning exercise. As a result, there will be a renewed focus on directors with appropriate domain expertise.

Let's hope boards are willing and able to integrate a risk viewpoint in their strategy discussions with management.  Without it, many companies will continue flying blind.