“When we talk to senior stakeholders about risk, it’s really about finding a balance across the entire organization. This balance refers to addressing the sensitivities between strategic, operational, and compliance risk, and ensuring the right information and transparency exists,” said Henry Ristuccia, partner and U.S. leader of governance and risk management at Deloitte. “However, in many organizations, candid and open interaction is not happening as often as it should. In order for directors to fulfill their fiduciary responsibility to shareholders, this should be present. While there is some evidence of real change in many boardrooms, there are still cases where we’ve seen some hesitancy among directors to cross that line with management.”

David Meachin, chairman and CEO of Cross Border Enterprises, a New York-based investment bank, agreed that boards need to push hard and question management often on the topic of risk. “When financial services firms were queried about the risks they were taking, did the board ask forcefully enough?” Meachin wondered. “The board needs to keep asking until they get an answer they are satisfied with.” It’s the board’s job to think about the what-ifs, added Meachin.

Debra Perry, who serves as a director at Conseco and Korn/Ferry International, said there were three fundamental causes of the financial crisis. “There was a prolonged period of very low interest rates that prompted investors and lenders to lower standards in search of yield. Second, there was lax oversight of our financial system on the part of regulators who had an excess of confidence in self-regulation; and third was the emergence of securitization as a financing paradigm. Securitization enabled the transference of risk in ways that distanced the end investor from the point of origination and obscured the character of the risks taken by originators.”

“Short-termism”—or the pro-pensity for shareholders and managers to act on immediate pressures and motivations—also surfaced as a driver of the crisis. “How do we measure, as a society, what’s important?” asked William Parrett, director for Blackstone Group, Eastman Kodak, Thermo Fisher Scientific, and UBS. Against the backdrop of investor short-termism, management’s focus on immediate outcomes was not surprising. Parrett added, “There’s no question in my mind that companies were focused on the short term while trying to manage around the risk. This contrasts with the public response to the swine flu, which is a great example of something that could have become unmanageable if longer-term thinking was not in place.”

Maureen Errity, director of the U.S. Center for Corporate Governance, Deloitte LLP, pointed out that the board’s role is to assess how to balance short- and long-term performance goals: “Risk just isn’t about threats; it also has a positive upside when managed properly. Then, it’s also about value creation.”

Ristuccia challenged roundtable participants to prepare what he called a “master list,” a summary of the key things directors need to know about their company’s top risks. “What we’re seeing is that all directors around this table are saying, ‘How do we simplify risk management, and create value by taking certain kinds of risks? We need to look at the process and understand what is spent on risk management, compliance, and governance. Also, we need to know how we rationalize controls to reduce what is a significant byproduct of risk management—cost.’ Usually when I talk to directors like you, I want to talk about how to integrate the management of risks into common frameworks and processes.”

Francis Byrd, managing director of corporate governance and practice co-leader at The Altman Group, a proxy solicitation firm, suggested that directors need to be asking themselves what is keeping them awake at night: “Do you know what the top five risks for your company are? If you have a grasp on those, then that goes a long way toward getting to the ‘master list.’”

Based on his long experience in counseling management, Robert Dilenschneider, the former chief executive of Hill & Knowlton who now runs his own public relations firm, said most CEOs with whom he has interacted privately believe their board members don’t fully understand risk, Wall Street, or their company. “There are still board directors whose purpose in serving on the board feels like a 1950s approach—prestige, compensation, perhaps the ‘good ol’ boys’ network,” he asserted. “In some cases, they lack a serious understanding of what is needed, which is a serious defect.”

Perry countered that she was “disappointed to hear that when CEOs push back, it’s usually because they don’t want to hear any objections. It’s code for, ‘I know where I want my risk appetite and it may not be where you folks think it should be.’ I’m not sure how we get around that.”

One way, said Nicole Sandford, a partner at Deloitte’s U.S. Center for Corporate Governance, may be to solicit information from sources other than management: “Historically, most of the information that the board receives comes from management. You can learn a lot about the company’s risks from analysts’ reports and industry journals. Even institutional investors are generally happy to share their thoughts about risks and opportunities if the board is willing to listen.”

Deloitte’s Ristuccia posed the following question: “If you tested all these good ideas, would the same mistakes have been made, or would the outcome be different? Are we seeing a legitimate change in governance? What are some of the specifics that can prove the company’s culture is changing?”

Essential to achieving risk intelligence is a culture that not only balances short- and long-term perspectives, but also supports open discussion about uncertainties, encourages employees to express concerns, and maintains processes to elevate concerns to appropriate levels—including to the board level. Some of the more obvious changes are around transparency and the ability of the CEO to “know how to assess the risk factors,” added Ristuccia. “All cultural change needs to start with management.”

The efforts of the IRS to recover some of the billions of dollars each year lost to offshore tax evasion is extending beyond the government’s efforts to force Swiss bank UBS to release the names of 52,000 American account holders in order to find tax evaders.

The Foreign Bank Account Report, or FBAR, is a once-obscure tax form that forces taxpayers to provide information on income they earn or bank accounts they hold overseas.

The requirement applies to U.S. citizens and residents who have offshore accounts totaling $10,000 at any point during the year.

The penalties are increasingly harsher than in years past. Those who have failed to report offshore income, even just a few hundred dollars, could be subject to a $10,000-a-year penalty going back several years.

The IRS can also impose a penalty of $100,000, or one half the value of the account. The deadline to submit forms is September 23. But the government expects more than the 386,000 forms filed last year. Those who already paid taxes on foreign income but didn’t file the form may escape harsh penalties.

UBS and the governments of the U.S. and Switzerland are in talks to settle a major tax-evasion case that could require the Swiss bank to reveal some of the 52,000 account-holder names the U.S. has brought, reports The Wall Street Journal.

The talks would not reveal all of the names, but those mentioned could lead to criminal prosecutions of U.S. clients. UBS could turn over some names to the IRS if actual fraud under Swiss law could be cited in the accounts.

Evidence for fraud is one way for Swiss banks to disclose names without violating secrecy. In February, the Justice Department sued to gain access to the 52,000 accounts. But some 7,000 accounts are more likely to be subject to the settlement because they are tied to offshore companies and trusts—which are more susceptible to fraud.

Chief Executive Oswald Grübel, who took over in February, said the IRS’s demand for information “puts UBS in an untenable position, caught between the laws of two sovereign nations.”

UBS, long a popular banking institution for foreigners looking to avoid domestic taxation, is stuck in the middle of a legal battle against the U.S. Department of Justice and Internal Revenue Service. The two regulators are looking for account information for those clients of UBS that may have committed tax evasion through their overseas accounts.

Though UBS has already disclosed hundreds of client names to U.S. authorities in order to avoid criminal charges, the Swiss Federal Department of Justice and Police says that such a decision was illegal, and that the agency “prohibits UBS explicitly from handing over client information.”

UBS has paid $780 million in fines, but an impending court battle could prove far costlier. One Swiss newspaper estimated that UBS could pay as much as $4.6 billion to settle the charges.

The Justice Department said Swiss bank UBS has “systematically and deliberately” violated U.S. law by dispatching private bankers to recruit wealthy Americans in evading taxes and must reveal the identities of 52,000 of those clients, reports The Associated Press.

The filing asks U.S. District Judge Alan S. Gold to hold UBS accountable for conducting years of illegal business in the U.S. Such business earned the bank more than $100 million in fees but the U.S. did not receive hundreds of millions of dollars in unpaid taxes.

“It is time for UBS to face the consequences that it has brought upon itself,” said Justice Department tax attorney Stuart Gibson in the 55-page filing. “The United States has proven its case for enforcement.”

UBS spokesperson Karina Byrne said the bank is “open to an appropriate solution.”

The Internal Revenue Services summons seeks the identities of all U.S. taxpayers who had an “undeclared” account at UBS between 2002 and 2007. UBS wrote to its U.S.-based clients in March and April telling them to close their accounts within weeks and transfer any money to a specially created U.S. unit, to another bank, or to withdraw the funds. That grace period ends July 2.

UBS previously received a deferred prosecution agreement with the Justice Department in which is agreed to disclose the identities of up to 300 U.S. clients and pay $780 million to the U.S. government.

Accountant Steven Michael Rubinstein, one of the 300 clients, plead guilty last week in Fort Lauderdale federal court to charges of filing a false tax return and faces up to three years in prison.