Pillsbury Winthrop Shaw Pittman

OECD calls for higher focus on outsourcing, IT and supplier risk

By Tim Wright

At the Twelfth Annual Corporate Accountability Conference held in Paris last month, Pierre Poret, counsellor and directorate for financial and enterprise affairs at the Organisation for Economic Co-operation and Development (OECD), announced that ‘too often, in the enterprise, there [is] little or no board-level responsibility, with the burden and oversight responsibility [for risk management] effectively stopping at the level of the line manager’. He was referring to the findings of the OECD’s Risk Management and Corporate governance report, which showed that companies’ boards often played too limited a role in risk management and that outsourcing and supplier-related risk is much overlooked.

The report is the summary of the OECD’s peer review process, which implements the OECD Principles in order to assist market participants, regulators and policymakers. It is based on survey responses from participating jurisdictions as well as an in-depth review of corporate risk management practices in Norway, Singapore and Switzerland, covering the corporate governance framework as well as practices relating to corporate risk management of the 26 jurisdictions that participate in the OECD Corporate Governance Committee.

The report, which analysed both private and public sector businesses, found that ‘while risk taking is a fundamental driving force in business and entrepreneurship, the cost of risk management failures is still often underestimated, both externally and internally, including the cost…of management time needed to rectify the situation’. Risk governance standards tend to be very high level, which limits their practical usefulness, according to the OECD, as they should be more operational. In general, the effectiveness of an enterprise’s risk management culture can be critical to an organisation’s success (or failure)…

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