“Oversight” is generally defined both as “watchful and responsible care” and as “an inadvertent omission or error.” Perhaps the biggest challenge facing the boards of directors of public companies today is how to exercise its now mandatory risk oversight function through watchful and responsible care, without inadvertent omissions or errors.
We know how we got here—the freezing of the credit markets, the near total collapse of the financial markets, the great recession, and the attendant need to place blame. While many would argue that the directors of certain financial institutions may have dozed, or even fallen asleep at the wheel, few people outside of congress would argue that requiring boards to disclose how they discharge their risk oversight function will lead to real progress. The Securities and Exchange Commission proposed rule revisions of July 2009 include a new disclosure on the board’s role in the risk management process.
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