In the wake of the financial crisis
the Chairman of the US Fed Reserve commented 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 targets 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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