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CHAPTER 1A WORLDOF DANGERNicolas Aubert, UK Managing Director, ChartisSNAPSHOT■ New risks are constantly emerging, including the dangers of doing business inglobal markets.■ Many board members fail to recognise the dangers they face personally.■ Different-sized companies face varying sizes and types of risk.■ Managing risk is not just about buying insurance.■ With the right approach from the board, most risks can be successfully managedand mitigated.BALANCING RISK AND REWARDThe balance between risk and reward is the very essence of business: withouttaking risks companies cannot generate profits. But, as later chapters in thisGuide will explain, there is a world of difference between calculated risks, takenwith foresight and careful judgement, and risks taken carelessly or unwittingly.The starting point for boards is to oversee risk in relation to their organisation’srisk ‘appetite’ and ‘tolerance’ and to align their approach to risk with its broaderstrategic aims.In a world of increasing complexity and uncertainty, companies must build onthis foundation to manage risk more rigorously than ever.A few fall victim to ‘black swan’ events – catastrophic external factors that areentirely outside the company’s control – so rare and random that they challengethe ability of organisations to plan for them. But many simply fail to understandthe extent of the dangers to which they are exposed. Board members areparticularly culpable, often underestimating the risks that their organisationsrun, while also being blind to the dangers they face in a personal capacity, whichcan result in financial penalties, criminal actions and ruined reputations.(Chapter 11 of the Guide focuses specifically on the personal risks faced bydirectors and officers.)7