2007–2009: A US Perspective
The fact that people are full of greed, fear, or folly is predictable. The sequence is not predictable.
(Warren Buffett)
The previous chapter examined how the US reacted to a series of prominent and highly publicised company failures such as Enron, WorldCom and Tyco by reforming the regulatory framework and introducing both the Sarbanes-Oxley Act of 2002 and reforms to the listing rules of the New York Stock Exchange and NASDAQ. This chapter examines the global financial crisis triggered by the subprime mortgage collapse and the federal reforms that followed. In addition, it examines the criticism that the discipline of risk management received in the aftermath of the crisis and new approaches to systemic risk. As will be seen, the financial crisis is important from an enterprise risk management perspective as it has catapulted risk management into the spotlight for all the wrong reasons. Subsequent chapters examine the approach to corporate governance adopted in Australia and Canada, economies that enjoy higher governance standards and which have not suffered destructive scandals to the same degree.