Bim Afolami, the new minister for the City of London, is wise in pushing regulators to rebalance their approach to risk (“City minister urges watchdogs to tolerate risk”, Report, November 29).
Sir Adrian Cadbury, the doyen of UK corporate governance, before his death in 2015 wrote a personal letter to me asking that in my then forthcoming book Stop The Rot: Reframing Governance For Directors and Politicians, I should stress that effective corporate governance starts with entrepreneurship, which must then be balanced by compliance.
I consulted across five continents and have found a growing trend among regulators not just to build a new industry of compliance and reporting, but also to try and drive out any notions of risk and reward.
The recent delays in the setting up of the proposed new regulator — the Audit, Reporting and Governance Authority (Arga) — shows their muddled thinking, including the dream of creating a UK version of the US’s Sarbanes-Oxley Act with all its massive administrative cost burden.
What worries me most is that among many of the regulators that I have met, there is a preconception that risk is unlawful and should be banned.
It is lawful to take risk and to falter. That is how learning occurs. It is only unlawful if risk is taken for corrupt ends.
Bob Garratt
Hon. Visiting Professor in Corporate Governance, Bayes Business School Professor Extraordinaire, University of Stellenbosch Business School Good Governance Development,
London N5, UK
