Companies have never been more motivated to revisit risk management, but improvements will come slowly.
Kate Plourd, CFO Magazine
January 1, 2009
Clearly major rethinking is necessary - at the very least an analysis of why infant erm did not afford better protection. For example, globalization is a likely candidate for dramatically changing the nature of financial risk. By linking prices around the globe, it increases the rapidity and amplitude of price fluctuation. By linking investments around the globe, it decreases the opportunity for diversification. Similarly, every Board of Directors that rewarded its executives for reducing work force through layoffs at the same time was reducing the size of its business and decreasing demand for products in general. The risk of presumably unintended consequences surrounds many contemporary business and political decisions. The mechanism is analogous to the paradox of thrift. It is not unrealistic to say that Pogo's comment applies - we have met the enemy and he is us.
Posted by Alfred Weller | January 08, 2009 10:20 am
We know from studying trade credit receivables practices all over the world that most corporations, big and small, don't have credit risk procedures any more sophisticated than the subprime lenders did. If the customers passed a simple "in business" check, they got credit. Trade creditors have historically focused on selling more and not caring/worrying about credit risk. Now companies are realizing that they need to understand the risk of their customers' defaulting on payment. It no longer is enough to just have a "credit file" with a simple credit report. Companies are demanding yearly profiles on their customers, detailed financials on the large risks, and proof of cashflow strength from all of their customers to assess risk. It's about time. Pam Krank President The Credit Department, Inc (TCD)
Posted by Pam Krank | January 05, 2009 10:46 am© CFO Publishing Corporation 2009. All rights reserved.