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  4. Corporate Behavior and Risk Management

2015 Vol.1
Corporate Behavior and Risk Management


It is commonly thought that risk should be avoided. However, conducting actual business requires accepting an appropriate, non-negligible level of risk. When faced with a combination of risks, it is necessary to construct and consider various scenarios; for this, it is important to remember to account for scenario risk. Further, it is necessary to keep hold of the notion that society in general ultimately determines the definition of risk. From a risk management perspective, a company should not withdraw into its shell but be open to society. One aspect of the relation between risk management and compensation is the struggle to prevent excessive remuneration in performancebased schemes. It is essential to account for societal perceptions when setting compensation policy. For example, the scandal surrounding the London interbank offered rate (LIBOR), showed the need to manage for risk in an unexpected area. A result of changing community perceptions, this teaches us the importance of dialogue with society, including within the company itself, as part of corporate risk management.