The high-profile financial failures of world-leading companies such as Enron,WorldCom and Parmalat have put risk management and corporate governance firmly back on the agenda for companies and their treasurers.
Increasingly, it is recognised that an effective enterprisewide risk management approach is imperative in order to minimise the impact that unforeseen events can have on business profitability, not to mention the damage they can do to companies’ market reputations, their branding and investor confidence.
Greater controls are being called for by shareholders, investors and government regulators, with the onus placed on board directors to keep their houses in order. Corporate treasurers cannot be unaware of recent events – indeed, their role in the world of ‘corporate governance’ may only just be beginning.
Should we be doing more? Are we doing more and, in some instances, do we have to do more, have become key questions for most treasurers. For organisations currently seeking compliance with Section 404 of Sarbanes-Oxley – the answer is a definitive ‘yes’.
Much has been discussed in relation to what shape an effective regime of corporate governance should take. While many dismiss the possibility of the UK and Europe following the US down a similar path to a prescriptive system, tougher requirements may be just around the corner. Either way, the need for a regularly-reviewed system of enterprise-wide risk control cannot be ignored.
But what does this mean for corporate treasurers? Can they, and should they, have a great role to play in the new world of corporate governance?
In the first instance, it is never too early to get involved. While primarily responsible for the pursuit of ‘best practise’ within their own operations, treasurers could have an equally vital role to play in risk management processes organisation-wide.
Treasurers are used to risk – they are used to taking a long-term view and taking the necessary precautions to safeguard their operations. More to the point, they stand to lose much from an unforeseeable adverse event that results in damages to corporate reputation and a loss of investor confidence.
In this month’s issue of The Treasurer the Spotlight section focuses on Risk Management, with a special emphasis on corporate governance and how treasurers could, and should, get more closely involved. For some, corporate governance may be seen as an additional burden, but for others it may bring new opportunities, enabling them to develop their roles and profiles company-wide.
LIZ SALECKA
Editor