Published February 2021
While working as a middle manager for Sauer Inc. in the late 1990s, I was invited to take part in a business risk assessment project. The time period corresponds closely to Sauer’s initial public offering, so I assume the risk assessment exercise was one of the boxes that had to be checked as the company transitioned from being privately owned to publicly traded in May 1998.
I welcomed the opportunity. It was a chance to emerge from whatever departmental rabbit hole I was toiling in at that point in my career and spend some time in the fresh air pondering the big picture, the company as a whole. What’s more, the exercise was facilitated by a couple of sharp folks from a well-respected company that was a household name. This was going to be a nice learning opportunity – something I always relished.
Today, I couldn’t tell you much about the actual exercise. I don’t recall what we determined to be the highest risks facing the business or what the abatement plans were to minimize those risks. (Oddly enough, I do remember what conference room we used … a neural scientist could probably explain why.)
Nonetheless, I kept the keystone handout from the exercise provided to each of the participants, a one-sheet model (laminated, of course) listing all of the potential risks for our type of an organization. If my quick count is correct, there are 73 in all! That’s right, 73 unique risks … and “pandemic,” which arguably took out more businesses in the past year than the next 10 on the list combined, isn’t one of them.
But the reason I kept the handout isn’t because of the information on it. Rather, it’s because of the lesson learned due to the name of the subcontractor proudly listed at the top of the handout.
At the time, Arthur Andersen LLP was one of the “Big Five” national accounting firms. As we listened to Arthur Andersen teach us about business risk, little did we know that within five short years they would be gone. Poof! The Big Five would soon become the Big Four.
As the world painfully learned in 2001, Arthur Andersen wasn’t following its own advice to assess the risks within its own business. Enron shocked the world by becoming the largest bankruptcy in U.S. history, only to be broken months later by WorldCom. Investigations revealed that Sunbeam Products and Waste Management were not accurately reporting their finances. The common denominator? You guessed it … Arthur Andersen was performing their audits and attesting to their results. Nudge, nudge, wink, wink. In short, an audit from Arthur Andersen became a scarlet letter.
One of the major sub-categories listed on the handout is “Integrity Risk.” As I work with various organizations, rarely is it necessary to spend much time discussing more than the top handful of risks … the vital few. And while those vital few vary among organization, if leadership integrity is an issue, absolutely nothing else matters.
Stay safe … be well!
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