Governance Tension: Managing Risk vs. Maximizing Shareholder Wealth
Corporate governing bodies are caught in a battle between risk management and shareholder wealth maximization. As the risks to a business become more sophisticated and complicated, risk identification and management are crucial to success. In its list of six key themes expected to emerge in 2014, Ernst & Young’s Fraud Investigation & Dispute Services (FIDS) identified several themes related to risk management. According to the press release, “Regulators are challenging corporate compliance and governance models as companies aim to mitigate risk while shareholders expect growth.” The FIDS group lists the following six key themes on which it expects clients to focus in 2014:
- Dealing with reputational harm and the business risk associated with cyber-crime will become part of a general counsel’s responsibility set.
- Balancing significant growth opportunities in Africa with perceived corruption risk.
- The impact of regulation will be felt stronger than ever by the financial services industry.
- FCPA compliance will remain a top priority for life sciences companies operating in emerging markets.
- Anti-money laundering and corruption programs to face greater scrutiny.
- The opportunity to leverage “Big Data” in the context of compliance and anti-corruption will allow companies to ask new questions.
While most corporate administrators realize the increasing number and complexity of corporate risks, too few have developed solid plans to mitigate the risks. In a survey of 446 business executives conducted by NC State’s Enterprise Risk Management Initiative, 55 percent of the respondents stated they believed that the volume and complexity of risks have increased over the past five years; however, only 20 percent described their organization’s risk management as “mature.”
Even more alarming is the reported lack of integration of risk management into the strategic planning process. In the NC State survey, more than a third of the respondents’ organizations do not conduct formal assessments of emerging risks. Further, only 29.7 percent of the companies represented have a formal policy statement about its ERM approach, and only 31 percent have a chief risk officer.
The MPPA program at Ohio Northern University can help you to develop a solid understanding of risk identification and management and how to incorporate ERM into corporate governance. Learn more about how the MPPA program can prepare you for an exciting career in corporate governance, forensic accounting, auditing or taxation.
 EY Names Top Fraud and Corruption Trends for 2014, New York, 16 December 2013, Retrieved on July 14, 2014 from http://www.ey.com/us/en/newsroom/news-releases/news-ey-names-top-fraud-a...
 ERM Initiative Faculty and Chris Cox, 2014 Research Report on Current State of Enterprise Risk Management, Retrieved on July 14, 2014 from https://erm.ncsu.edu/library/article/2014-research-report-on-current-state-of-enterprise-risk-management