Corporate Governance and Enterprise Risk Management
November 12, 2009
Faculty Lead: Paul Walker
In 2006, a study conducted by the Conference Board in conjunction with McKinsey & Company and KMPG found that corporate directors were not providing sufficiently robust enterprise risk oversight. Specifically, research showed that many directors approached risk management on a case-by-case basis but did not necessarily have “adequately robust and systematic enterprise risk management processes in place.” Interestingly, the study also suggested that standards used in banking and insurance industries might set the pace for other industries due to more developed ERM processes and concerns about directors’ exposure to liability for failing to satisfy their fiduciary duties. Ironically today, Citigroup’s board has been under recent attack for failing to address the company’s risk management and compliance issues, resulting in director turnover and a pledge to focus more on risk management. And, AIG’s board has been sued for “grossly imprudent risk taking.”
In 2009, unnecessary and uninformed risk taking emerged as one of the root causes for the breakdown in the global financial and credit markets, leading to an increased regulatory focus on risk management and a more critical risk oversight role for the board. Within this context, “Corporate Governance and Enterprise Risk Management” explored the board’s changing role in corporate risk management, including the risk oversight obligations of the board and recommended ERM practices and processes, as well as the risk management expertise required by the board, within the company, and from risk advisers to ensure protection against firm and system failure. Targeted senior-level board members, risk advisers, and C-levels discussed these issues with M.S. in Accounting students.
Melanie Thomas Armstrong, Partner, Washington Federal Practice, PricewaterhouseCoopers
Michael Chagares, Executive Partner, Accenture