Risk is at the heart of strategy, and boards and specialist risk functions must work more closely together to avoid or mitigate the catastrophic consequences of events. That was the conclusion of Roads to ruin, a study of major risk events: their origins, impact and implications.
The study was commissioned by Airmic, the association for people with a responsibility for risk management and insurance for their organisation, and was conducted by Cass Business School.
The study investigated the origins and impact of a number of major corporate crises in the ten years from 1999 to 2009. They involved substantial, well-known organisations such as Coca-Cola, Firestone, Shell, BP, Airbus, Société Générale, Cadbury Schweppes, Northern Rock, AIG, Independent Insurance, Enron, Arthur Andersen, Railtrack, the UK Passport Agency and also some smaller firms.
Several of those organisations did not survive, and most of the rest suffered severe damage.
The aim of the research was to:
- trace the deeper causes of the crises
- assess the post-event resilience of the companies involved
- consider the implications for the risk management of companies in general.
The report featured 18 detailed case studies that analysed the impact of critical events – both on the enterprises most directly affected and, in many cases, on other associated firms. There are references to around 40 organisations in total.
The case studies provide a rich source of lessons about risk, risk analysis and risk management, in the context of critical events of many different types. These events ranged from fires, explosions and product-related and supply chain crises to fraud and IT failures. The report details more than 100 specific lessons about risk that emerge from the case studies.
Much broader lessons have also been distilled from the case studies. Several of the firms studied were destroyed by the crises that struck them. While others survived, they often did so with their reputations in tatters, and faced an uphill task to rebuild their businesses.
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