Executive Summary
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Organizations both create and manage risk on a global scale, but their capacities to manage risk vary enormously.
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Since the origins of crises in organizations are well documented, anticipating risks and preparing for their control have become an essential part of risk regulation regimes.
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Regulation, which is often formulated in response to a crisis, targets the risks that organizations can pose to the stability of the macroeconomy, to fair competition, and to consumer protection.
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Typically regulation is state-based, but there has been a move to include transnational organizations.
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Regulation is about managing risk, not elimination of the underlying activities.
Introduction
As far back as the Middle Ages, history provides plenty of lessons on the effects of the failure of financial institutions, of consumer ignorance being exploited through the sale of inappropriate securities, pension plans, and mortgages, and of high and opaque charges for financial products and services. Arguably, regulation has become imperative today, given the increasingly transnational nature of financial markets. Another factor is the growth of large multinational organizations, now possibly more powerful than some nations. They pose particular risk and regulatory problems because they can both create and manage risks, sometimes on a global scale. Crises can have catastrophic effects nationally and internationally. Anticipating risks and organizing for their control have thus become an integral part of risk regulation regimes, which aim to influence the risk management practices of organizations. Their objectives are to make sure that organizations give high priority to risk management, to shape motives and preferences, and to influence organizations’ objectives and practices accordingly.
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