The Editor,
FinancialTimes,
London
14 November, 2008

Sir

RISK AND THE G20 – DON’T WAIT FOR GLOBAL WATCHDOG

World leaders at this weekend’s G20 summit in Washington may discuss the idea of giving the IMF new regulatory powers – to provide an ‘early warning’ of risks to the global economy.  And good luck to them.  But meanwhile, directors and managers must act locally if they are to avoid repeating the mistakes which led to the global financial crisis.  Risks that matter to companies cannot be macro-managed by an international watchdog.  Every organisation should examine and construct its own ‘risk culture’. 

Self-regulation is the best way for the Board of any business to address the risks it is likely to encounter and implant the right controls.  This is how to create an ethical and effective corporate environment.

Risk is not something to be avoided.  It should be embraced.  Without risk there are no rewards.  It is a matter of embedding the right attitude to it. To achieve a healthy risk culture, Boards must invest adequately in risk management resources.  A highly trained internal audit function will help senior management develop a strategic overview of all the risks an organisation faces.  A system of controls, correctly monitored, can provide assurance to the Board.

Every day there is a new call for directors and non-executives to look properly and clearly at the risks to their organisations.  One glance at the results of the mismanagement of risk in the banking sector should be enough to send many directors with renewed purpose, back to the Boardroom.  There, a free and frank discussion should ensue. 

It’s around the Boardroom table, not at the G20 summit, that risk management begins.

Gail Easterbrook
Chief Executive Officer
Institute of Internal Auditors – UK and Ireland


Published in the FT on 17.11.2008