Posted by & filed under Accounting Careers, Canadian Economy, Fraud Accounting, Managerial Accounting.

Have you ever wondered what is the fundamental purpose of a Corporation: You are correct in assuming “To Make a Profit”. Henry Ford once said ” A Business that makes nothing but money is a poor kind of business”. Let us put ourselves into perspective and see what we are referring to.

Looking back a few years ago, the financial turmoil caused our most senior world leaders to rethink the fundamentals of our financial system. BP’s deep water drilling off the coast of Mexico caused the death of 11 oil rig workers and untold damages to our environment and ecosystem.

Assessing Risk:

When we think of Risk assessment, we often think of the internal controls to prevent and detect fraud. We should also consider the Operational Risk. In the BP scenario, what safety procedures were in place to avert a disaster, in the financial markets what processes are in place to ensure that a second financial meltdown does not occur,again.

What processes are in place to ensure that another European Country does not fall into financial difficulty, similar to Greece. If we look into Agricultural, how do we ensure that our Corporations that mass produce our food, will have enough water to irrigate their crops? What process is in place to ensure that our Cities will survive and continue to have enough energy to warm or cool our homes?

Our Present Culture:

Focuses on legal compliance rather than safety, we seem to follow the rules and respect the government policies, but as we can see we are having more and more problems with our food source, where products are recalled  for Listeria or other deadly diseases. We live in a fast paced world where there is little room for complacency, the reality is that in a rapidly changing environment the profile of Risk also changes.

What Should we Look Forward to?

We cannot eliminate Risk and it would not be practical to do so, but we can change our business culture. We should no longer consider making large sums of money at the detriment of our environment and society. We should consider putting in place Risk assessment programs, that ensure sustainability of our resources, protection of our waters and to be forward looking to adapt and manage developing risks.

Discussion Questions:

1. Do you think the time has come to rethink,” Corporate Profits at any Cost”

2. From this article, if a culture of Risk Assessment was put in place, “Could we have avoided the BP disaster”

3. Using a Risk Assessment approach, should we continue to drill in deep waters?

Read more on Risk: upload the At Risk magazine from KPMG Fall 2010 issue

Visit Canadian Business Dec. 6, 2010 issue : Read the opinion from Steve Maich “What BP and Lehman Bros. have in common”

 

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