Tag: risk management

Corporate GovernanceESG

Edelman Trust Barometer depicts business as a trusted, potentially stabilizing, force

Are there any institutions that we trust? According to an article from Edelman, which has just published the firm’s 23rd annual trust and credibility survey, while, as a society, we are still polarized and deeply distrustful, business was viewed as “the only trusted institution” at 62%. It’s sure not the ‘60s anymore! As the article recognizes, “[s]ome might have a hard time believing that today’s corporate leaders now stand as a stabilizing power in a fragile world.”   As detailed in the new 2023 Edelman Trust Barometer, “business is now the sole institution seen as competent and ethical; government is viewed as unethical and incompetent. Business is under pressure to step into the void left by government.” From 2020 to 2023, international survey participants increased the ethics grade for business by 19 points. Edelman attributes the stunning increase to business’s response “to the social and economic consequences of COVID-19 and Russia’s attack on Ukraine—among other pressing issues,” during which many “corporate leaders put self-interest aside.” In the survey, government and media were viewed as neither competent nor ethical, driving a “cycle of distrust” as “sources of “misleading information,” particularly social media.  To what does the barometer attribute these poor outcomes? In large part, to a sense of entrenched division and polarization that both arises out of a loss of faith in institutions and also generates it. Economic anxiety and income inequality are also seen as major forces in fueling polarization.  “Given the unsettled state of the world,” Edelman asks, “can business remain a stabilizing force”?

/ April 13, 2023
Corporate Governance

Geopolitics moves from the cocktail party to the boardroom

According to experts cited in this article from the WSJ, “[g]overnments are increasingly using ‘financial levers’ to advance national security goals,” a development that “has clear implications for businesses.” The war in Ukraine, with its related Russia sanctions, as well as the ongoing political tensions—and related tariffs and trade restrictions—with other countries to which we have deep economic ties have led risk experts to anticipate “more volatility ahead rather than less.” To be sure, war, political tensions and economic instability can affect companies’ current and prospective businesses. The Global Risks Perception Survey released this month by the World Economic Forum ranked “geoeconomic confrontation” as number three among the top ten identified risks over the next two years.  Accordingly, conversations about geopolitics that, say, ten years ago might have been reserved for cocktail parties are now taking place among managements and boards, leading some companies to recognize the need for a “geopolitical risk management function.” In this article, “Board Oversight of Geopolitical Risks and Opportunities,” two academics at the IMD Global Board Center offer a framework designed to help boards implement effective oversight of geopolitical risk.   To provide some insight into how boards are currently implementing oversight of geopolitical risk, Corporate Secretary has published the findings of a survey of governance professionals in a new report, “Geopolitical and economic risks: Board oversight in an evolving world.” 

/ January 19, 2023
Corporate GovernanceSecurities

How do companies cope with social risk?

How do companies cope with social risk? In “Blindsided by Social Risk—How Do Companies Survive a Storm of Their Own Making?” from the Rock Center for Corporate Governance at Stanford, the authors look at “social  risk,” essentially, reputational risk that can impair a company’s social capital and, in some cases, its performance.  These risks can arise from a variety of circumstances—a damaging statement or action by a company representative (a CEO, a board member, an employee) that triggers an adverse reaction from customers, employees, regulators or the public; a troubling interaction with a company’s services or a product name considered offensive; a damaging event at a competitor that fuels a broader inquiry across the industry. In these types of cases, “media attention (social or traditional) amplifies the impact, sparking a backlash that extends well beyond the directly affected parties.” Because social risks can be more nebulous and unpredictable than traditional operating or financial risks—and the extent of potential damage more difficult to gauge—companies may find it especially challenging to anticipate, prepare for and guard against them.  Yet, the paper asserts, “so called ‘social risk’ can be just as material as any operating, financial, or strategic disruption.”  What can companies and boards do to protect against these types of risk events or mitigate their impact?

/ July 30, 2020
Accounting and AuditingCorporate Governance

KPMG surveys audit committee concerns

by Cydney Posner What are audit committee members’ greatest concerns? Audit committee members participating in KPMG’s 2017 Global Audit Committee Pulse Survey identified risk management as the biggest challenge for audit committees in 2017, with 42% of those surveyed characterizing their existing risk management programs as requiring “substantial work,” and […]

/ January 18, 2017
Accounting and AuditingCorporate Governance

Agenda overload for audit committees?

by Cydney Posner In its 2015 Global Audit Committee Survey, KPMG found that audit committee members around the world had four key concerns: “economic and political uncertainty and volatility, regulation and the impact of public policy initiatives, operational risk, and cybersecurity.”  Another growing concern, though, was agenda overload.  According to […]

/ February 5, 2015