Risk

David P. Cluchey, University of Maine School of Law

Abstract

Abstract Failures of risk management at some of the largest financial services companies in the world were one of the primary causes of the financial crisis of 2007-09. The regulatory responses to these failures by the U.S. Congress and U.S. administrative agencies have been indirect and limited in scope. This paper examines those responses and argues for a more aggressive and broader U.S. regulatory approach on risk management. Specifically, the article advocates that each publicly traded company in the United States be required to designate a committee of its board of directors to have primary responsibility for overseeing the risk management process at the firm, that the risk committee have access to expertise and resources adequate to perform its oversight function and that there be significant disclosure to markets and to shareholders about the firm’s approach to risk management.