Money matters

The media headlines tend to focus upon the wrong targets. These focus upon criminal managers’ activity, or rogue traders. But, most company underperformance or losses are the result of those innocent errors – operational risk and strategic risk. That means that a single top-level planning fault, or a dozen daily back-office errors, will often add up to much more damage than a single rogue trade or fraudulent activity.
We need to re-assess our risk-return appetite against the likely returns in the quagmire of mixed competencies and unrealistic expectations. Risk appetite must match the risk offer. The investor must meet the company, in person or by telecommunications, and grill it with questions:  “Is the CEO innocent but incompetent; or much worse?”  “What was his previous record?”  “How can I get past the PR to track him down?”
One of the potential hazards is that CEOs and CFOs are advertising the value of one asset – their innate management skill. This only enrichens their bonus pay, pension and stock options.6 Where the investor is faced with an unfamiliar company executive or a novel asset, then a risk management methodology such as RAMP may offer much benefit. A risk review by unbiased parties using forensic investigative techniques can provide a lot of benefit. A risk- mapping analysis by impartial experts can be obtained in a Delphi-group risk-reward analytical process.