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The obsession with green: Subconsciously increasing risk in third-party governance

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Listed:
  • Nguyen, Don
  • Gilson, William

Abstract

The purpose of this paper is to argue that senior management is increasing risk as a direct result of risk mitigation actions. This report looks at governance and risk in the context of third-party governance and argues that boards and senior managers need to reevaluate their own understanding of risk before applying their culture to third party oversight. The paper examines the obsession with the colour green, which we believe is leading to passive oversight and a lack of operational and risk awareness. At such a point, perception becomes irrational and good (performance indicators that tell a story) is seen as bad and bad (weak green indicators) as good. This paper puts forward the suggestion that through better reporting and discussion, organisations can spend less time, have more understanding, reduce risk and give a better service to their clients.

Suggested Citation

  • Nguyen, Don & Gilson, William, 2018. "The obsession with green: Subconsciously increasing risk in third-party governance," Journal of Securities Operations & Custody, Henry Stewart Publications, vol. 10(2), pages 157-166, March.
    • Handle: RePEc:aza:jsoc00:y:2018:v:10:i:2:p:157-166
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    More about this item

    Keywords

    databases risk; investment operations; oversight; governance; outsourcing; control; mitigation;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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