Governance and Management:
BEYOND THE FINANCIAL CRISIS
Leaders must visibly and tangibly engage in promoting and recognizing
safe behaviors, to clearly communicate to all employees and contractors
that safety is not a priority but a core value. Priorities can change with
the business environment. Core values do not.
—MARVIN ODUM, PRESIDENT, SHELL
The culture of safety starts with leadership, because leadership drives
behavior and behavior drives culture. Leaders influence culture by setting
expectations, building structure, teaching others, and demonstrating
—REX TILLERSON, CHAIRMAN AND CEO, EXXONMOBIL
While this book focuses on lessons of the financial crisis for governance and risk management of major financial firms, the lessons apply to management broadly, and not merely to risk management. Incorporating a sound sense of risk-reward trade-offs is good business; risk management is merely half of the equation. In the end, JPMorgan Chase, Goldman Sachs, Wells Fargo, and TD Bank were better-managed firms than many of their competitors; strong risk management was only a part of managerial quality more generally.
Moreover, organization, governance, and management lessons from the crisis apply to firms other than major financial firms. Firms are becoming more complex, and not only in the financial sector. The Boston Consulting Group surveyed over one hundred listed companies in the United States and Europe and found that “over the past 15 years, the amount of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed in each of these firms has increased by anywhere from 50 percent to 350 percent.” 1