Proper management is critical to good corporate governance. Senior management and particularly the board must assess not only the risk that the company faces in its day-to-day operations but also the overall risk profile of the company.

The board has the role to assess and reduce risk

The board needs to make a wide range of decisions in order to limit the risk exposure of the company. This includes financing, investments, dividend and crisis management decisions. For example:

• How to raise capital? 
• What captial structure to adopt?
• What project to invest?
• How to redistribute dividends?
• How to manage crisis?
• How to leverage capital market information to make sound decisions?

The ability to manage risk determines the financial performance and ultimately the survival of the company.

Reducing investment risk

Major financial markets around the globe are creating corporate governance or sustainability indexes to help investors invest in companies that meet certain criteria. The performance of these indexes in some cases suggest that in a crisis situation companies with good governance perform better then. To learn more on sustainability indexes see the Dow Jones sustainability indexes website at http://www.sustainability-indexes.com/