Too many executives and boards continue to take a reactive rather than strategic approach to risk and reputation management
The regulatory responses to the many scandals of the past dozen years (Enron, WorldCom, Siemens, Wall Street and Fleet Street) should have curbed the excesses that caused them. But they didn’t.
The endless parade of troubles continues – if it isn’t one industry it’s another, if it isn’t one company it’s another, if it isn’t one hedge fund it’s another, if it isn’t one CEO it’s another, if it isn’t one insider trader it’s another, if it isn’t one briber it’s another.
What is the reason for all this malfeasance and recidivism? A root cause is that so many C-suites and boards don’t understand and have not adopted a strategic approach to governance or risk and reputation management. Risk and reputation management requires constant protection, care and feeding – it needs a strategic long-term approach, not reactive responses.
A strategic approach identifies stupid risk, unknown risk and illegal risk. A good system creates an early warning system to prevent serious reputation damage. It will also prepare an organisation for the scandal that will inevitably happen. It will build and embed better processes in the system that will curb or thwart bad behaviour.