Risk Management and Compliance

AuthorBert Spector
ProfessionProfessor of Strategy at Northeastern University
Risk Management and Compliance 87
Ask directors of corporate boa rds what keeps them up at night, and the
answer typically comes down to one word: risk. Unanticipated, unknown dis-
ruptio ns caused by both ext ernal a nd interna l factor s: tsunam is and gove rn-
ment actions as well as financial reporting m istakes and even fraud. Then
ask a follow-up question: other than shareholder value and bottom-line per-
formance, what should boards pay the most attention to? The answer comes
back: risk management. Clearly, risk is a topic that demands consideration.
Risk management has important legal ra mifications. Counsel is often
involved in crafting a response when companies are forced to deal with the
negative cons equence of risk a nd noncomplianc e. Further more, general
counsel is typically par t of the firm’s executive committee that assumes
primary oversight of companywide risks. To help appreciate the challenge,
this chapter will address two ty pes of risk: decision-making risk and fi nan-
cial controls risk.
The Nature of Risk
Business decisions—whether to invest in a new product, move to a new over-
seas market, buy or sell an asset, chang e a supplier, and so forth—involve

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT