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Opinion/Comment

The science of governance: A blind spot of risk managers and corporate governance reform?

Shann Turnbull
Journal of Risk Management in Financial Institutions, 1 (4), 360-369 (2008)
https://doi.org/10.69554/XSJQ9023

Abstract

This paper identifies the science of governance as a crucial blind spot for risk managers, company directors, regulators and law makers. There is little evidence that law-makers, corporate governance reformers or risk managers apply the science of governance identified 60 years ago. As a result, there are no accepted criteria for identifying or measuring good or higher standards of corporate governance or identifying its relevance for managing risk. This paper identifies why the current top-down approach to governance and risk management is incompatible with the bottom-up approach found in biota to manage risk so as to sustain life in highly complex uncertain environments. A bottom-up approach allows investors and stakeholders to become co-regulators of the risks to which they are exposed. As the mission of regulators is to protect citizens, citizen involvement as co-regulators richly increases the ability of risk managers, directors, firms and their regulators to minimise the risk exposure of firms, their stakeholders and/or the financial system. The paper identifies the need for risk managers, company directors, regulators and law makers to acquire knowledge of how to apply the science of governance to manage risk on the most efficient and effective sustainable basis.

Keywords: communication; control; co-regulation; governance; regulation; regulators; requisite variety; risk management; self-governance

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Author's Biography

Shann Turnbull has been Chair and/or CEO of a number of Australian publicly traded companies, three of which he founded. He was one of seven founding partners of a private equity group that acquired control and re-organised a dozen listed Australian corporations. In 1975 he co-founded the first educational course in the world for company directors. Shann has written and contributed to a number of books and is a prolific writer for both professional and academic publications on the theme of reforming the theory and practice of capitalism. He has a BSc from Melbourne University, an MBA from Harvard and a PhD from Macquarie.

Citation

Turnbull, Shann (2008, September 1). The science of governance: A blind spot of risk managers and corporate governance reform?. In the Journal of Risk Management in Financial Institutions, Volume 1, Issue 4. https://doi.org/10.69554/XSJQ9023.

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cover image, Journal of Risk Management in Financial Institutions
Journal of Risk Management in Financial Institutions
Volume 1 / Issue 4
© Henry Stewart
Publications LLP

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