“Our headquarters are situated two blocks away from a major downtown railyard, the central hub of multiple commercial rail lines. If there is a significant train collision — something involving toxic chemicals, and there is a bad spill — we are basically ‘management dark’ for at least two weeks.” This report comes from a CFO who talked (privately) to a colleague of mine (a business consultant) who was, in mid-May 2010, probing about sensibilities regarding corporate-level risk exposures.

I’d wager that this CFO — and others — had not imagined the scenario before then. Let’s just say that it was a moment in corporate management — or call it the growth frenzy — that stopped people cold.

Unsurprisingly, the C-level has, in May-June 2010, been forced to reassess the probability of outsize, long-tail, company-busting risks — which are now making headlines as we go to blog-press on June 16, 2010.

The chairman of BP has just left the White House, after telling President Obama and the world that BP is prepared to suspend (for now) its regular shareholder dividends and put aside $20 billion to pay for cleaning up the worst environmental disaster in U.S. history. Outside experts, meanwhile, are suggesting that the amount BP will have to fork over to stop the oil spill and clean up the Gulf will top the $60 billion mark. Maybe it’s even more. In truth, these estimates, from either side, are no more than a finger in the wind.

The outlook rang all-too-familiar weird bells for me. There are three reasons.

First, I happened to be visiting the HQ of my own firm, APQC, based in Houston, Texas, in late April. It was 6 days after the Deepwater Horizon rig blew up. I had a chance to chat with a fellow business traveler at the airport. This gentleman was an oil rig expert, visiting from Canada’s North Slope. Blithely, I asked, “So, what happened?”

He said two things that I’ll never forget: “It was human error and it will be the end of BP.” Egads!

Soon, I was reminded of an earlier corporate blow-up. I recall my interview in 1998 with Andy Fastow, CFO of Enron, who declared: “Everything we do is for sale if somebody wants to buy the risk from us.” Oh, dear!

Second, I have preliminary survey results (from 300 large companies polled in the spring of 2010) that say that three out of four CFOs in the U.S. admit that they fail, repeatedly, to predict and plan for business risks that are not already on the radar screen. They and their organizations do not think outside the box. In short, they have not created a justifiable ROI for investing in the integrated financial/operational information systems that track and report on Key Risk Indicators — never mind effective communications to reinforce policies — necessary to tip the enterprise from blindness (focused solely on short-term profit performance) to long-term, ethics-oriented and brand-guardian-focused decision-making.

Third, I know from my many years of asking CFOs how they cope with enterprise risk — hopefully, dealing systematically with the little risks that escalate into firm-busting risks — that few have the time, the patience, the will, or the resources to put their shoulders to the task.

Could it be that the typical, large-company, white-hair CFO hopes to retire before the rig blows??

Oh, dear! ###