Scrutiny, like hemlines and much besides, displays a strongly cyclical variability. Companies coast through boom years on a scrutiny-lite diet only to shift into doom-laden risk aversion, viciously curtailing investment projects and employment, once the economy turns down.

We lurch unwittingly from Greenspan’s ‘irrational exuberance’ to Myners’s ‘reckless caution’. Time then to start calibrating scrutiny and risk attitudes over the business cycle to mitigate a downturn, not worsen it.

The discipline of corporate risk management isn’t meant to be tainted by mood swings as good times give way to bad: it should be a force for stability. But in reality there is fickleness towards risk management – and risk managers. Put simply, companies are too credulous when business is good.

Their risk manager is seen as a drag on performance and is unceremoniously sidelined, except for the tedious business of compliance. Most strikingly, firms too often won’t investigate an exceptional profit even though this represents an alarm that managers are taking on too much risk. Sensible restraint during expansionary years is scorned; ‘prudent’ spells ‘underachieving’.

Less remarked on is how various current management practices are stoking recklessness too. Take the management-by-exception approach, now so commonplace. Targets are set, and wherever they are met, or indeed exceeded, it is rashly assumed that all must be well. The idea is that once the vast majority of targets in a large, decentralized corporation are met, then aggregate corporate performance will look after itself – and shush the analysts.

Clearly, for the time-hungry manager, management-by-exception is alluring. Yet what happens when it becomes imperative to reach expected performance regardless of what risk is taken, or indeed whether the target is realistic?

The temptation will be significantly to up the appetite for risk and worry about duly disclosing that afterwards. It is not just managers who can drive this quest. Far from being blame-free, investors can spark the whole insidious process.

Whereas the motivation of challenging-but-achievable targets and measured incentives can work wonders, stratospheric targets can beget a frenetic myopia.

But, as hundreds of factories around the world are shuttered, it is painfully clear that the swing of the risk appetite pendulum veers towards caution in an equally extreme way.

Typically, hard-pressed firms go for the fabled ‘low hanging fruit’, indiscriminately cutting staff and R&D. Such quick fixes may well come back to haunt you. Ironically, an enterprise can put its long-term future at risk both through hubris and by being too risk averse.

So how can we temper this seesaw approach to risk appetite? Clearly, calibrating risk better over the economic cycle is vital. Self-awareness is a good starting point.

Executives should wake up to the fact that the temptation is always to overact. Companies must then have the courage in bad times not simply to cut costs, but to also re-deploy assets; rather than axe investments, they should re-direct them for the long term.

Risk management and performance management need to work in synch; we cannot allow scrutiny levels simply to be subjugated to fluctuations in performance and profitability.

As Warren Buffet might have said, the maxim for executives must be to be sceptical when others are credulous and credulous when others are sceptical. The question is how far we can collectively heed such advice.

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Wim Van der Stede is CIMA Professor of Accounting and Financial Management at the London School of Economics and Political Science.