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Ethics, Governance and RiskManagement: Lessons From MirrorGroup Newspapers and Barings Bank Lynn T. DrennanABSTRACT. While corporate failures, such as Enronand WorldCom, have focused attention on issues ofbusiness ethics, corporate governance and risk management, there is nothing intrinsically new in the reasonsbehind their collapse. Neither is there anything fresh in themedias rush to identify a scapegoat. An examination ofthe financial collapse of Mirror Group Newspapers andBarings Bank, demonstrates failures within both thesecompanies corporate cultures and management systems,which allowed, if not encouraged, unethical behaviour bykey individuals. It is argued that a combination of legislation, regulation, effective risk management and appropriate sanctions are needed, if such unethical behaviour,and resulting corporate failure, is to be prevented in future.KEY WORDS: business ethics, corporate failuers, corporate governance, management systems, risk management, unethical behaviour.IntroductionAlthough the failures of both Enron and WorldComhave focused even greater attention on the issues of
business ethics, corporate governance and riskmanagement, there is nothing intrinsically new inthe reasons behind their collapse (Elliot and Schroth,2002; Fusaro and Miller, 2002). What distinguishesthese events is, perhaps, their size and the fact that,although these failures occurred in the United States,the impact of their collapse has been felt worldwide.It can be tempting to believe that such major business catastrophes could not happen here. The UKaccounting bodies have, however, argued that othercountries, and in particular the United Kingdom, arenot without their own examples of major corporatefailure (Institute of Chartered Accountants in England and Wales, 2002). A series of financial scandalsin the UK private sector, during the 1980s and early1990s, led to the introduction of a series of codes oncorporate governance, which in turn acted as adriver for risk management (Drennan et al., 2000).These incidents covered a wide range of abuses, andinvolved a number of well-known companies, suchas Polly Peck, Guinness, BCCI, Mirror GroupNewspapers (MGN) and Barings Bank. It was clearfrom these cases that the existing system of selfregulation, as well as the ability of the judicial systemto identify and penalise misconduct, was sadlylacking and largely ineffective (Arnold and Sikka,2001).Lynn T Drennan is Executive Director of the Centre for Riskand Governance, and Head of the Division of Risk, in theCaledonian Business School at Glasgow Caledonian University. A fellow of the Chartered Insurance Institute andFellow of the Institute of Risk Management, Dr Drennan hasserved on the...