The financial reform effort now under way might strike some as fairly comprehensive. But at least one expert says that one glaring flaw in the emerging bill is that it does little to strengthen the hand of financial risk managers (financial risk management news), whose job is to tell executives that they are overstepping their bounds.

Cliff Rossi--a former senior risk manager at Countrywide, Washington Mutual and Citigroup--tells Bloomberg that policy makers "should also consider ideas such as encouraging corporate-governance structures in which risk officials report to independent members of banks' boards and requiring regulatory reviews of risk managers' departures to ensure they aren't being forced out." Indeed, the top executives often take a dim view of risk managers. The risk-management department at one bank he worked at "was referred to as the 'business-prevention unit,' and looked at as a cost center."

I doubt we'll see any legislation in this department, but boards should be looking at ways to strengthen the information they have in these areas. Risk metrics and assessments are vital and ought to be analyzed objectively outside the realm of executives. We'll see what emerges in the next few years.

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