The Great Debate UK

Walker review should pinpoint risk


pippacroney-Pippa Croney is a Director of JRBH Board Consulting. The opinions expressed are her own.-

Big bonuses have dominated headlines in recent weeks, and it is expected that David Walker’s review of corporate governance in British banks, due out on Thursday, will add fuel to the debate. While remuneration is likely to steal the limelight, deeper in the darkness lies a less emotive evil – risk.

Risks, particularly financial risks, have been taken by our most powerful organisations to a disconcerting degree – one that our current corporate governance system and non-executive directors were not able to control. So did non-executives fail to understand the scale of the risks involved, or did they not deem it their responsibility to challenge their respective boards?

Arguably both are to blame. Let’s first consider board directors’ understanding of the risks. Structural issues currently hamper non-executive director’s access to information.  Non-execs are not super-human, but they are set with a phenomenal task – to supervise these vast multinationals with little support, limited capacity and restricted resources, relying almost exclusively on information provided by the executive. It is like trying to gauge the severity of an upcoming volcanic eruption with a thermometer.