It is my general experience that establishing trust with a company’s stakeholders is an essential requirement for success. The unknown is always one of the greatest sources of fear. In stock markets it is always easy to sell now and ask questions later. When an inevitable problem arises, credibility of top management, especially the CEO and CFO, is an essential resource. The day I knew that Enron was toast was when it became public that Andrew Fastow had a stake in an off-balance sheet transaction where his personal interest was directly contrary to the company he supposedly served. From that point there was no possibility of restoring public trust in time to avoid a collapse.

To my mind, building a foundation of trust among all stakeholders is the strongest reason for companies to be forthcoming in making risk information public. If done consistently and realistically, such information can help markets evaluate adverse events more realistically instead of fearing the worst and acting accordingly.