Beyond derivatives: what's driving today's business risks?
Chief Executive (U.S.) › Nbr. 1995, January 1995
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Summary
Includes related articles - Panel Discussion
Participants at a roundtable discussion sponsored by Arthur Andersen and Chief Executive Magazine talked about risk management in an increasingly volatile, risky environment. The executives who attended the affair concurred that risk assessment requires a common language and an integrated approach. This means that risk management should be complemented by consistent communication of risk-related policies across the organization. The premise of this approach is that a company can be more able to control their risks if everyone in the organization understand the goals and objectives. Participants at the discussion include General Re Financial Products Chmn. Ronald Anderson, Alex. Brown International Vice-Chmn. J. Carter Beese, Smartphone Communications CEO-Chmn. Sebastian Cassetta, Rohr Chmn. Wallace Barnes, Atlantic Mutual COO-Chmn. Klaus Dorfi and CS First Boston COO-Pres. Allen Wheat.See the full content of this document
Extract
Beyond derivatives: what's driving today's business risks?
Identifying unanticipated risk is like searching for things that go bump in the night - by the time you stumble upon them, it's too late. CEOs gather to discuss the best ways to manage risk.
The nature and consequence of business risk that organizations face are becoming increasingly complex. The rapidity of change, the intensity of competition, and the impact of technological change tend to overwhelm organizations, often leaving CEOs unprepared. In the face of these and other risks, once-secure market positions can be jeopardized. Recent disclosure of possible price fixing at Archer Daniels Midland - not to mention the president-elect's serving as an FBI mole - may seem a bit out of the ordinary, but consider Bankers Trust's $80 million options-trading loss, Intel's slow reaction to its Pentium processor performance controversy, Prudential Life's deceptive sales practices, and Royal Dutch/Shell's turnabout with Greenpeace over the junking of its Brent Spar oil rig. No organization is immune. Bad things can happen to good companies - and do. So the key for CEOs, and the premise of the following roundtable held in partnership with Arthur Andersen, is how can companies anticipate more, and react less, to real and hidden risks? Can one establish a useful framework to anticipate risk?. One of the ironies of risk management is its link, in the public's mind, with a financial tool designed to reduce risk, the derivative. The $1.7 billion lost by Orange County, CA, for example, is a sum greater than the GDP of Mozambique and roughly the market value of Bethlehem Steel. Neither is the public reassured when it sees news broadcasts of Wall Street savants such as Felix Rohatyn warning darkly that "26-year-olds with computers are creating financial hydrogen bombs." Not all uncontrollable risk is financial, but the CEO faces an immediate buzz saw when markets move rapidly and exp...See the full content of this document
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