How Useful Are Risk Management Consultants? |
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| By Jack Wogan |
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| Risk management has become already an embedded concept in
corporate philosophy. It has also gained in relevance in
today`s world of interdependence and intricate business
relationships. As a matter of fact it is not only companies
that businesses need to take into account but also the state
with its myriad of rules and regulations. Being hedged from
risks means first and foremost, making sure that you comply
with the national, the European acquis-communautaire, if it
is the case and the international law. That is quite a
handful for companies to handle on their own. Businesses have to hedge themselves against numerous risks: some under their control, like health and safety issues, others less controllable, such as changes in exchange rate or political environment. Add to that the rules and regulations imposed by the state itself and you get a potential explosive situation. The crisis most of us are still feeling has shown that the area where the bosses tend to lose their sound judgment is that of debt. Traditionally top managers are paid based on how well shares perform on the market. They need to meet quarterly targets for earnings per share. And since their life at the helm of the company is more than transient their approach seems to be rather short-term. This sometimes creates pervert incentives for quick returns at the expense of sound risk evaluation. Another huge risk that the corporate world has to face is the amount of debt their firms should take on. Traditionally executive pay is based on share options, which means that the better the shares perform on the market, the higher the pay for the bosses. Knowing that their stay at the helm of the company is usually short-lived, senior managers lack the incentives to be prudent when it comes to leverage. The consequences of such actions are serious and in some cases catastrophic. And we do not have to look far to notice them. The current economic crisis is rooted in poor risk management. There is however, an option to ensuring that risk management is done objectively: hiring external risk management consultants. They are not in-house employees which makes them less likely to yield to pressure. They know their job and have vast experience in the area for which they provide consultancy. And since their job is to identify and assess risks, they have all the time in the world to do it right. |
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| Article Source: http://interpret.zar.vg | ||||
| About The Author Safety2Business is a leading provider of risk management consultants for effective Health & Safety and Risk Management solutions. |
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