ACCA

The financial crisis that began in 2007 has put the spotlight firmly on how corporates, especially those in the financial sector, have addressed issues such as risk, reward, governance and ethics. The difficulty lies in the balance to be struck. Now that the global economy appears to be climbing gradually out of downturn, it is timely to examine what needs to be done to try to prevent a recurrence of the problems we have seen in recent years.

This topical issue was the corner stone of a lively debate – led by Dr Kay Swinburne, MEP, Coordinator of the ECON and CRIS Committees in the European Parliament, Eric Ducoulombier, Deputy Head of the Unit Company Law, Corporate Governance and Financial Crime at DG MARKT, Willem J.L.Calkoen, lawyer at NautahDutilh and Paul Moxey, ACCA head of corporate governance & risk management – during an ACCA (the Association of Chartered Accountants) breakfast meeting entitled “Corporate Governance: How to Balance Ethics, Risk and Entrepreneurship?” that took place recently.

The basis for discussions originated in the recently published European Commission’s green paper – that looks at how corporate governance at financial firms could provide the necessary checks and balances to prevent bankers from taking the kinds of excessive risk that led to the crisis- and a new ACCA report entitled ‘Risk and reward – tempering the pursuit of profit’, which examines where the financial system went wrong prior to the financial crisis, with a massive failure of ‘people risk’ being identified.

The financial crisis has highlighted serious ethical failings; businesses of all kinds, including the banks, have been increasingly policed by reams of rules and regulations but we have seen during the crisis that, despite all these regulatory requirements, or perhaps because of them, individuals exploited gaps. A strong commitment to ethical business conduct on the part of directors and key staff is a strong line of defence against reputational damage and should be an essential part of any risk management strategy. Institutions and companies need to consider not only risk at the individual company/shareholders level, but also their impact upon the wider economy and society at large.

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