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As with most things in life, corporate governance goes through trends.  Following the Enron debacle and the enactment of Sarbanes-Oxley, the buzz was all about audit committees.  Do you have one?  Who is on your audit committee?  How often does it meet?  This eventually gave way to executive compensation and the Dodd-Frank and say-on-pay votes.  And now, the latest trend has emerged – risk.  I challenge you to attend today a corporate governance or director conference where the topic of risk does not come up.

It’s almost as if corporations and directors think that just by repeating the word “risk”, they convince themselves that all will work out.  It reminds me of Facebook’s IPO.  I was in the audience when Mark Zuckerberg spoke publicly for the first time following the company’s less than spectacular IPO.  Although in retrospect there were many things that contributed to the most disappointing IPO in history, analysts initially focused their criticism on the social media giant’s failure to have a forward-thinking mobile monetization strategy.  As I sat listening to Zuckerberg that day last September, I felt as though almost every other word out of his mouth was “mobile”.  It was as if you could hear his inner monologue – “just keep saying mobile and things will work out fine”.  Maybe he was right – Facebook just reported $375MM in mobile ad revenue last quarter (that’s up 23% from the previous quarter).

Don’t get me wrong, the focus on risk is a good thing.  Companies are now appointing Chief Risk Officers, forming board-based risk committees, and promulgating formal risk policies and procedures.  In terms of corporate governance best practices, this is a tremendous development.  But the question I and many others grapple with, is why now?  Of course for justification it is easy to point at recent headlines, such as the London Whale at J.P. Morgan or the Barclays Libor scandal.  But shouldn’t the topic of risk always have been a focus for corporations and their directors? As an elected director of a corporation, aren’t you charged with the responsibility of representing the interests of the shareholders – and in doing so, ensuring that you are at all times aware of the risks and opportunities that may present themselves to the corporation?

Perhaps the answer is that the focus has on risk has always been there, but in today’s complex business environment the associated financial peril is simply too great to avoid placing a substantial emphasis on risk.

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