Market crashes, rate shocks and pandemics that tested risk oversight.
Heavy leverage in real estate and credit products led to the largest bankruptcy in US history in September 2008.
A House hearing found the finance & risk committee, chaired by an 80-year-old director, met only twice a year. The board lacked current financial expertise.
A board must understand, and actively oversee, the company’s risk appetite.
The recession hit GM hard and its restructuring plan was rejected by the White House as not credible.
The government made CEO Rick Wagoner’s exit a condition of more aid. GM went through bankruptcy and returned to profit in 2010.
In a bailout, outside stakeholders can override the board.
Rising rates hit SVB’s bond holdings. A capital raise triggered a bank run and the second-largest bank failure in US history.
The CRO left in April 2022 and wasn’t replaced until year-end. Only one of seven risk-committee members had a risk-related background.
Risk oversight can never have gaps, especially when rates move fast.
COVID-19 froze global travel. Airbnb expected 2020 revenue to fall by more than half and its IPO plans were in doubt.
Within weeks it raised $2B, cut non-core bets and laid off 1,900 staff with 14 weeks’ pay. It went public in December 2020.
Fast, transparent decisions in a shock can save the company.