S01E10: Risk Management

“I’d say to most organisations that 80% of effective risk management is talking about it. So, forget the documentation — that’s 20% of it… The real benefit of risk, if you have the capability, is the talking. So, if something occurs in your organisation and you need to address it, get around a table and start talking about it straight away.”

 Alicia Leis, Partner (Audit, Assurance & Advisory), WLF Accounting & Advisory

Volkswagen, the German vehicle manufacturer, took a huge risk in 2014 and suffered as a consequence. Following a ruling from the Environmental Protection Agency, there was a whole-of-industry push to sell low emission diesel vehicles in the US. VW’s vehicles initially impressed environmental regulators but there was a catch. The cars were fitted with software that could favourably cheat the emissions test. It was known as a ‘defeat device’ but it didn’t fool everyone. Eventually, the ruse was uncovered and the fallout was severe with the company recording its first quarterly loss in 15 years of 2.5 billion euros.

In this episode, Cameron and Bridget look into this scandal from a risk management point of view with the help of special guest Alicia Leis, Partner (Audit, Assurance & Advisory) at WLF Accounting & Advisory.

Risk, as per AICD Not-for-profit Governance Principle 5: Risk Management, is defined as the effect of uncertainty on objectives. For many board members, risk management is a rather tedious topic that they’d rather not deal with. But for the savvy board member, it’s necessary to know how much risk the organisation is happy to accept. This is a fascinating discussion around one of the worlds most infamous corporate scandals and is a must-listen for any current or prospective board member.

A full episode transcript is now available online.

Episode Guide:

  • 0:32 — Overview of Principle 5: Risk Management
  • 7:01 — Interview with Alicia Leis around the importance of evaluating risk around the board table, both before and after the fact
  • 35:12 — Wrap-up