Effective Risk Management and Improved Corporate Governance

Chapter in: Complexity and Crisis in the Financial System - Critical Perspectives on the Evolution of American and British Banking, ( ed by M Hollow, F Akinbami, and R Michie), Cheltenham, Edward Elgar, (Forthcoming)

Posted: 10 Nov 2015

See all articles by Roman Tomasic

Roman Tomasic

University of South Australia; Durham University - Law School

Folarin Akinbami

Durham University - Durham Law School

Date Written: November 8, 2015

Abstract

Risk plays a critical role in entrepreneurship and finance. In entrepreneurship there is a direct relationship between risk and reward, whereby it is necessary to incur some risk in order to reap the rewards of entrepreneurship. This is particularly the case in financial markets, where the calculation and pricing of risk is often an integral part of the activities carried out in such markets. The corporate form has developed as a medium for entrepreneurship and risk-taking in business. In order to counter the propensity of entrepreneurs to take on too much risk and, in so doing, endanger the corporation’s shareholders and other stakeholders, it has become necessary to make effective risk management an important part of the governance of public corporations. This paper explores the links between risk management and effective corporate governance. It examines some significant risk management failures in a number of European banks that faced difficulties during the global financial crisis of 2007-2009. In response to these risk management failures the chapter examines some of the ways that law can be used to improve risk management in corporations. It also analyses some of the corporate governance reforms proposed, to tackle excessive risk-taking, in the aftermath of the global financial crisis. The paper has been supported by funding from the Leverhulme Trust (tipping points project) and highlights the closeness of the link between effective risk management and effective corporate governance.

Keywords: Corporate Governance, Enterprise risk management, GFC, Internal controls, Rogue trading

JEL Classification: D21, D81, G34, K22

Suggested Citation

Tomasic, Roman A. and Akinbami, Folarin, Effective Risk Management and Improved Corporate Governance (November 8, 2015). Chapter in: Complexity and Crisis in the Financial System - Critical Perspectives on the Evolution of American and British Banking, ( ed by M Hollow, F Akinbami, and R Michie), Cheltenham, Edward Elgar, (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2687607

Roman A. Tomasic (Contact Author)

University of South Australia ( email )

GPO Box 2471
ADELAIDE
City West, 5001
Australia

Durham University - Law School ( email )

Palatine Centre
Stockton Road
Durham, Durham
United Kingdom

HOME PAGE: http://www.durham.ac.uk

Folarin Akinbami

Durham University - Durham Law School ( email )

Palatine Centre
Stockton Road
Durham, County Durham DH1 3LE
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
638
PlumX Metrics