The ERM Current™

As more attention is devoted to post-mortem analysis of the economic meltdown and what financial institutions can do to improve their risk management practices, it is becoming clear that regulatory and credit rating scrutiny will become much more intense.  Here is an excerpt from an article in today’s London Times that supports this view.

 ”there was the failure of external regulators and rating agencies to monitor the banks’ risk-controls. Despite deficiencies in bank management, some of the problems could have been averted with stronger checks and balances from the regulatory bodies charged to assess risk. But rating agencies undervalued risk when assessing new products. And regulators ignored the dangers of macroeconomic contagion, as well as failing to apply any independent checks to the risk models used by banks.”

How is your company preparing for the increased scrutiny?  Wheelhouse Advisors can help with cost-effective strategies to manage your risks and meet stricter regulatory requirements.  View the brief video below or visit www.WheelhouseAdvisors.com to learn more.

Yesterday, Rick Steinberg wrote a great article in Compliance Week detailing the many failures of risk management leading to the recent financial market crisis.  For those of you who may not know,  Mr. Steinberg is a leading authority on the topic of risk management and a principal author of the COSO Internal Control Framework that has become the de facto standard for public corporations and their boards of directors.  As such, Mr. Steinberg has a unique perspective of the unfolding events in each of the firms that have contributed to the market collapse.  In particular, Mr. Steinberg points to boards and their responsibility for holding senior management accountable.  He states,

“….the board must understand what management is doing to identify, assess, and manage significant risks facing the company. It must be comfortable that management has a process in place, and that the process is working effectively. The board must be comfortable with management’s appetite for taking on risk, and that senior management is positioned to obtain accurate information about key risks and relays that information to the boardroom.”

While he also notes areas of weakness with other players such as the regulators and credit rating agencies, it is this critical component of risk management and corporate governance that cannot be ignored.  Without a strong enterprise risk management process and frequent communication between board members and management, companies will not be able to navigate the critical risks and new regulatory environment that is now on the horizon.