by Rick Nason, PhD, CFA
Partner, RSD Solutions Inc.
Going through the week’s mail I received the one of the few annual reports that I elect to receive from one of the companies that I invest in. Yes – I am one of those old fogeys that still occasionally looks at them in hard copy form.
As I tell my students, the only sections that I look at are the MD&A and the notes. I found the notes were particularly interesting in this one annual report I received this week. They are interesting in that there is an incredible amount of detail on the company’s risk management policies. It explains all of the risk management strategies they have in place – stopping just short of describing the risk management practices in place for when the “C” level officers clip their toe-nails. It is truly overkill.
It got me to thinking about what the objective of all this risk reporting is. While it is great that companies are taking risk reporting seriously, there is also the possibility of too much of a good thing. You can refer back to my article “Is Your Risk System Too Good?” in the RMA Journal (http://www.rsdsolutions.com/quotis-your-risk-system-too-goodquot-article-rick-nason-published-rma-journal).
The only reasonable rationale that I could come up with for so much risk reporting was “risk-washing”. With all of the emphasis on risk awareness and risk preparedness, I can only assume that this company wants to be seen as a leader in risk management. However just as companies that try too hard to be seen as being environmentally friendly get accused of “green-washing”, it may be the case that we will start to see companies “risk-washing”.
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