Janvier 2005

Many of the world's largest companies have suffered significant losses in market value at one time or another during the past decade. These losses were often the result of failures to anticipate, hedge against, and manage diverse risks. While losses due to extraneous circumstances are often unavoidable, failure to adequately plan for challenging events can exacerbate those losses. Moreover, some losses are the result of companies undertaking acquisitions that promise much yet deliver little.

Consequently, companies that practice good risk management can preserve and enhance value when their competitors cannot. In today's fast moving environment, risk management is a critical task of CEOs and boards of directors. Regulatory authorities and exchanges are promulgating new disclosure and listing requirements that mandate more explicit information on risks and the risk management practices of the business.

This environment, in time, may well affect the complex framework in which CEOs operate as well as the role of the CEO vis-àvis the board, shareholders, and a variety of internal and external stakeholders. It may be premature to speak of the demise of the "imperial CEO," but it is not unreasonable to expect CEOs to focus more on building consensus and assuring accountability.

In fact, the risk factor is forcing companies to go beyond managing risk in silos, thereby creating an integrated risk management function. While risk can never be eliminated, companies that move beyond traditional risk management to implement a more comprehensive approach to their control environment will be much better placed to prevent, minimize, or recover from losses in shareholder value.

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