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The issue of risk management was a vital topic missed by G20 representatives during their analysis of the Global Financial Crisis (GFC) according to Senior Lecturer in Finance at the Faculty of Economics and Commerce Dr Les Coleman.

“The G20 has done a lot of work looking at ways of avoiding another financial crisis, but they are tackling things like capping executive salaries and not addressing what caused the GFC – and that was risk,” he says.

“Risk in business is exactly the same as it is in our personal lives; it’s a decision that you take that may have bad consequences. We need to understand the risks companies are taking across all industrial sectors.”

Dr Coleman says the main problem with risks in business is that many are hidden from shareholders.

 “Risks are like cockroaches, they thrive in the dark and if we turn more light on them and provide more information for shareholders and investors we would understand the risks and force management to address them adequately,” he says.

Dr Coleman says what’s needed is a list of risk indicators, covering everything from legislative breeches to trips and spills, which are then reported to investors on a regular basis.

 

 

Improvements in risk management processes can and should be made to avert the next bushfire catastrophe, says Dr Les Coleman, in the wake of the release of the bushfires Royal Commission interim report.  "It comes back to looking at the risks, putting in place mechanisms to try and reduce those risks ahead of time, and recognising that when these extreme events start to unfold, its really beyond anyone's physical resources to handle every part of it."

"It's hard to be critical of people under these circumstances. The Royal Commission has spent a lot of time looking at risk - and will spend more time looking at it - as risk is a major part of this issue: how do we understand it, quantify it, and work out what to do." 

However Dr Coleman, a senior lecturer in finance and a risk and crisis management expert from the Department of Finance, says criticism of the CFA is harsh.

"The CFA certainly came in for criticism, but if you look at the resources deployed on the day, they were huge: around 15 000 firefighters, 1000 vehicles, 50 aircraft and so on.  It's actually quite hard to work out what more they could have done.  So I think a lot of the criticism of the CFA is ‘Monday Morning Quarterbacking’ if you like, looking back on how to handle something that, at the time, they really couldn’t get more information about and didn’t have any additional resources."

"It would have been very very difficult to improve their management on the day.

The Carbon Pollution Reduction Scheme (CPRS) is not the most efficient way to reduce carbon emissions, says Senior Lecturer in Finance Dr Les Coleman.

Dr Coleman says that while there have been extensive discussions about the pros and cons of the CPRS, alternatives to the scheme have not been adequately considered and people with specialist knowledge in the area of carbon reduction have not been adequately consulted.

“The reduction of carbon emissions is a very scientific objective, yet the process of deciding how to do this is being run by politicians and diplomats. If you really want to achieve reductions in carbon emissions, you need a technical solution. This could be achieved by consulting people with specialist knowledge like scientists, chemists and people with expertise in markets and taxation and not just diplomats.”

“The Government is setting up a false market with the CPRS and we know from the recent global financial crisis that markets don’t solve all of our problems. I would much rather see a technique used that has worked successfully in the past - a simple and direct tax system.”

“The main disadvantage of a tax system however is the name, as nobody likes to be accused of introducing another tax. Otherwise it’s a fairly direct process and could be introduced as a fairly simple extension of the current petrol excise or GST.”