The chairman of the board plays a critical role

MANY of the headline-grabbing scandals over the years (think WorldCom, Enron, Wells Fargo, WireCard) had their root cause attributed to a culture that bred and perpetuated a blatant disregard for ethical conduct.

Even in the absence of corporate malfeasance, organisational culture affects the risk profile of a company. In the recent collapse of Archegos Capital Management, the hedge fund was allowed to accumulate leveraged positions in excess of 10 times the collateral pledged - despite founder Bill Hwang having been previously charged with insider trading by the US Securities and Exchange Commission and banned from trading in Hong Kong.

Credit Suisse took a US$4.7 billion hit from the fallout that ensued. Its chief executive officer and chief risk and compliance officer had to step down, the entire executive board forfeited their bonuses, and chairman Urs Rohner waived the fees of his chairmanship.