PRMIA-Alex_Todd-The_ALPHA_and_BETA_of (notes)
•Als PPTX, PDF herunterladen•
0 gefällt mir•249 views
The document announces a PRMIA Toronto Chapter event on March 8, 2011 featuring a presentation by Alex Todd from TE Research on corporate governance and risk oversight. The presentation will discuss understanding systemic risk, risk management and systemic risk, risk management in a complex world, trust enablement for risk management 2.0, strategic corporate governance, and aspirational corporate governance. Contact information is provided for Alex Todd.
Empfohlen
Weitere ähnliche Inhalte
Mehr von Alex Todd
Mehr von Alex Todd (19)
PRMIA-Alex_Todd-The_ALPHA_and_BETA_of (notes)
- 1. PRMIA Toronto Chapter Event The ALPHA and BETA of Corporate Governance and Risk Oversight Tuesday, March 8, 2011 Alex Todd TE Research A division of Trust Enablement Inc.
- 3. Risk Management & Systemic Risk http://www.youtube.com/watch?v=zOG4kipTnl8&feature=player_detailpage
- 4. Risk Management in a Complex World Risk Management Innovation
- 5. Trust Enablement for Risk Management 2.0
Hinweis der Redaktion
- Thank you for inviting me to share my thoughts about the role of corporate boards in specifying risk-adjusted return objectives for management and overseeing their performance. My principal message is that I believe our approach to risk has been generally misguided by focusing excessively on protecting from external threats, and thereby tending to externalize costs, which in the aggregate has created systemic risks that undermine all our risk management efforts and eliminate any perceived competitive advantage gains. Corporate boards have a critical role in overcoming these deficiencies. I will keep my opening remarks brief and succinct in order to allow lots of time for discussion. Let's begin with a couple of videos that will help us establish a common understanding of some terminology and concepts.
- See video at: http://www.youtube.com/watch?v=nwNLk_rShkk&feature=player_detailpage Note that systemic risks are the product of a viral breakdown in trust.
- See video at: http://www.youtube.com/watch?v=zOG4kipTnl8&feature=player_detailpage Note that ironcally, Credit Default Swaps are a mechanism for managing risks.
- Risk management is designed to deal with quantifiable risks at the lower end of the uncertainty continuum, but is ineffective, if not counterproductive in complex situations with higher levels of uncertainty.
- Recent research suggests that making it easier for people to trust can improve their ability to manage risks. Similarly, my recent proposal to the Management Innovation eXchange for "The Trust Extender: Enlarge the circle of trust by empowering stakeholders to trust and reciprocate trust“ introduces a Trust Enablement approach for reciprocal risk management, which I believe is useful for evolving from current risk management approaches to Risk Management 2.0, since it inherently addresses systemic risks. Unfortunately, if good risk management practices have had difficulty gaining traction in the boardroom, trust has not even been a legitimate business consideration - except in crisis situations. And management has therefore neither had a budget nor a mandate to pursue strategic trust objectives.
- My research into the relationship between corporate governance practices and firm performance revealed corporate governance "styles" to be associated with distinct measures of business performance (see “Corporate Governance Best Practices: One size does not fit all”). For example, a management controlled board style was found to be associated with superior revenue growth, while a trusted board style enjoyed higher share prices. In each case it is not a stretch for the board to identify the strategic stakeholders: where revenue growth is a priority, the customer is clearly the strategic stakeholder; and where share value is the priority, investors are the obvious strategic stakeholder. Knowing this, makes it much easier for boards to put stakeholder trust on their policy and strategy agendas and thereby give management a clear mandate to improve conditions for trust with their strategic stakeholders and allocate the required resources to do so.
- My research of more than 5,000 US listed companies has further validated the connection between corporate governance styles and stock performance, and has allowed me to develop an investment screen to construct a portfolio that has outperformed almost every published index since 2006 (see Strategic Corporate Governance Indexes). So corporate governance is more than a risk management mechanism that affects investment BETA. It is also a mechanism for strategically enhancing the value of public companies - ALPHA.
- Beyond its strategic vaue, as a policy consideration, I recently introduced the Aspirational Corporate Governance framework to equip corporate boards with criteria to address business complexity and stakeholder trust, and dynamically adapt to changing business conditions with a longer time horizon. I believe it can help firms become sustainable value creators, with better prospects for longgevity, while being constrained by fewer regulatory restrictions. In summary, I believe corporate boards are the key to affecting sustainable improvements in firm performance.