Financial Management & Risk

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Typhoon Saomai swirls in the Pacific Ocean east of Taiwan and the Philippines.

How Serious Is Climate Change to Business?

The fifth annual global executive survey about sustainability and innovation conducted by MIT Sloan Management Review and the Boston Consulting Group suggests that climate change has yet to become a very urgent issue for most companies — and that only a minority of companies are preparing for its effects. In a preview of our upcoming report (due out in the fourth quarter of 2013) we present six charts that provide a snapshot of report statistics.

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The Insurance Industry's Renewed Commitment to Sustainability

Insurers are just beginning to wake up to their role in environmental sustainability, argues Olivier Jaeggi, founder and managing partner at ECOFACT. The most important recent development: the launch of the Principles for Sustainable Insurance in 2012. Ban Ki-moon, Secretary-General of the United Nations, wrote that the Principles provide “a framework for the global insurance industry to address environmental, social and governance risks and opportunities.”

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Sustainability? Don’t Go It Alone

At the Sustainable Brands seventh annual community in June, a key theme was succinctly framed by Sally Uren, acting chief executive, Forum for the Future: “pioneering companies are hitting the limits of what they can do alone.” To address sustainability-related issues, a growing number of companies are becoming more collaborative. Not merely with suppliers, but with competitors as well. The complexity of business problems connected with sustainability is demanding collective action.

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Insuring a Better Future: Sustainability at Swiss Re

As climate change progresses, the risk of financial and personal losses related to extreme weather events such as hurricanes, tornadoes, floods, heat waves, and droughts grows greater. Insurers and reinsurers must take these risks seriously, and for some companies, that means advocating strategies to help business and society mitigate the effects — and reduce the causes — of climate change. MIT Sloan Management Review’s Nina Kruschwitz spoke with David Bresch, Head of Sustainability at Swiss Re, about his company’s efforts to address the complex problem of climate change risk.

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Mitigation or Adaptation? Lessons from Abolition in the Battle Over Climate Policy

Although both mitigation and adaptation are needed to address climate change risks, says MIT professor John Sterman, adapting to climate change may be taking resources that could be better spent on mitigation and prevention. We have the ingenuity to successfully tackle this complex issue, and can look at the lessons learned from the abolition of slavery to help guide us.

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The Trouble With Stock Compensation

Research suggests that paying outside board members with equity grants leads to companies with less socially responsible behavior. That’s the conclusion of Yuval Deutsch and Mike Valente (both of Schulich School of Business, York University), who looked at social performance ratings and director compensation data for more than 1,100 U.S. public companies between 1998 and 2006. “Our findings suggest that there is a need to investigate more creative compensation arrangements,” they write.

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Can High-Frequency Trading Drive the Stock Market Off a Cliff?

Much of the time, high-frequency trading firms play a benign role in financial markets. These firms use fully automated computer systems to buy and sell stocks very rapidly, making thin profits by being ahead of human orders. But in a nervous market with downward price pressure, high-frequency trading can create fierce volatility. A computer simulation of high-frequency trading behavior showed that a complex system “may turn into an unfamiliar monster when an invisible tipping point is passed.”

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Sustainable Finance: 7 Steps in Managing Reputational Risk

Financial institutions’ funding decisions makes them gatekeepers for sustainable development. But how do they develop the policies and procedures that will guide how they make decisions and satisfy stakeholders? According to Olivier Jaeggi of ECOFACT, effective decision-making for sustainability can be summed up in a set of seven best practices.

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New Energy Policies for the World’s Sixth Largest Bank

Crédit Agricole, the sixth largest bank in the world, puts its money where its principles are in its recently released social and environmental policies. In keeping with its stated policy of supporting projects that are “sustainably vitalizing,” the bank’s policies prohibit funding energy projects that rely heavily on unsustainable fuels.

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A View from the Peak: Balancing Our Carbon Budget

Earlier this year, the financial services company HSBC came out with a report in which their analysts calculated that taking climate change seriously could cut share prices of major oil companies by up to 60%. That report, Peak Planet: The next upswing for the climate agenda, held some sobering news for business. Now that it has been made freely available on the company’s website, executives concerned with managing risks may want to read it.

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Why Managing Consumer Privacy Can Be an Opportunity

How many privacy policy updates does your credit card company send you each year? Companies often “manage privacy” and “keep consumers informed” by drafting their privacy policies as broadly as possible and consider their job done if they change the policy 10 times a year to fit with changing practices. However, managing privacy should not be seen by businesses as a burden. Instead, it can be a valuable way to generate and maintain a good relationship with your customers.

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The Trouble With Too Much Board Oversight

The high-profile scandals of the late 1990s have increased the oversight duties of independent directors. Has the increased focus on board oversight improved the quality of board monitoring? And can board oversight become detrimental to desirable objectives? This article focuses on three aspects of oversight: design and implementation of suitable executive compensation packages; removal of underperforming CEOs; and disclosure of earnings that reflect the company’s true financial conditions.

Image courtesy of Flickr user Sam Beebe, Ecotrust.

Why Boards Need to Change

Many companies have initiated sustainability and corporate social responsibility programs that represent good first steps toward improving the impact of their organizations on the environment and society. However, unless boards change, many of the initial sustainability efforts launched in corporations are likely to be temporary. For organizations to achieve sustainable effectiveness, they need a corporate board that is designed to lead in a sustainably effective way.

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Gaining a New Understanding of Risk

  • Blog
  • Read Time: 3 min 

In these days of uncertain markets – and an uncertain economy – risk can seem almost omnipresent. But how do you manage risk prudently – yet still grow your company? Harvard Business School professor Robert S. Kaplan began exploring risk management in the wake of the 2008 financial crisis, after he saw venerable firms such as Lehman Brothers and Bear Stearns collapse – despite having risk management functions. Here are a few of his insights on the topic of risk management.

Showing 21-40 of 95