The
Chairman of the US Fed Reserve Ben Bernanke has
stated that "even as we make progress on known vulnerabilities, we must
be mindful that our financial system is constantly evolving and that
unanticipated risks will develop over time,"
In many
companies the Directors simply do not have the understanding of the mechanics
or the day to day activities of the business which they purport to run.
For example
I have worked in trading environments where totally unrealistic profit target
have been passed from Board level to trading departments. No cognisance having
been given to the disproportionate risks which need to be taken to achieve
these targets.
Some of the
most spectacular financial flame outs have followed a period of ostensibly
highly successful trading. In their desire to recognise these “profits” no
thought were given as to how they were being made. In such times it would be
well to take note of the old adage that is something looks to be too good it
usually is!
If your
company is bucking the trend in these difficult times it may well be that you
are implementing a winning formula.
However
history tells us that it is often a prudent course of action to look under a
few stones – just in case.
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