by Sanford Lewis
Corporate Disclosure Alert Blog
For the last ten years, risk governance and risk management have been on the ascendancy. Early in the decade, Enron and its ilk helped to propel a sense of urgency and crisis, driving the completion of the Enterprise Risk Management framework of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2004).
But the recent financial crisis, compounded by snowballing sustainability issues such as climate change and product toxicity, made it clear that risk management is a work in progress. Far more must be done to turn the patchwork of risk management approaches into viable public policy and corporate governance solutions.
From my perspective as counsel to investors who are typically concerned with both the financial and societal risks associated with their portfolio companies, here are 10 key questions on risk management likely to be answered over the next decade:
1. Will the major environmental and social risk disclosure loopholes be closed by the Securities and Exchange Commission and Financial Accounting Standards Board?
2. Will “sustainability risk” become an operative principle of corporate decision-making?
3. Will compensation structures be linked to long-term risk and performance?
4. Will board level risk governance committees catch on?
5. Will directors face liabilities for poor risk oversight?
6. Will Enterprise Risk Management protect investors and society, or merely insulate management and boards from potential liabilities?
7. Will corporate risk managers apply the precautionary principle to potentially catastrophic risks to society?
8. Will the attention to “Black Swan” risks — those considered largely unpredictable — lead to disempowerment, or action to avoid and plan for the worst consequences?
9. Will Web 2.0 help to bring radical transparency to corporate risks?
10. Will shareholders use their new powers to establish greater transparency and accountability on risk?
Read a discussion of each of these 10 points, along with links to relevant reference materials at my Corporate Disclosure Alert blog.
Attorney Sanford Lewis advises investors focused on financial and societal risks associated with portfolio company issues such as sustainability, public health, and human rights. He is counsel to the Investor Environmental Health Network as well as many of the funds and investors mentioned in his full blog post on Corporate Disclosure Alert.
Loading ...