It has been, to say the least, a tumultuous week for corporate Ireland. Two of the top three stockmarket companies have been in the international headlines for all the wrong reasons. Just when it was starting to look like things could not get any worse, it emerged yesterday that the Securities & Exchange Commission - the US stockmarket regulatory body - is now investigating accountancy practices at Elan.
The news sent the pharmaceutical company's shares sharply lower for the third time in a week. AIB, meanwhile, is still trying to come to terms with how one man, working in its US subsidiary, could have wiped out half of the banks profits for 2001 - apparently through ill-judged foreign exchange deals.
This week's developments have damaged the reputation of Ireland internationally; stockbrokers trying to sell Irish shares to foreign investors are going to have a difficult job. Nor will the market's reputation be improved by pending legal action between Fyffes, the fruit company, and DCC, the industrial holding group. A number of major institutional investors are also becoming involved in this action.
For the moment, the major focus remains on Ireland's largest bank. AIB believes it is the victim of a fraud, rather than its own management failure, but it still has some way to go before it can prove this is the case. At very least, its internal controls have failed it badly. The outcome of its investigation into the affair will be eagerly awaited.
Considering everything that has happened this week, one might ask if there is some widespread systemic weakness in Irish management culture. Looking back just twelve months to corporate debacles such as Baltimore Technologies and Eircom, only seems to confirm such a view.
The reality is that failure is as often the outcome of corporate endeavour as success. The spectacular collapse of Enron, the US energy trader, and disasters such as Rail Track, the privatised UK rail company, prove that Irish business is not unique in experiencing major corporate failures which call management practices into question.
The common thread in the events of this week is that the market is ruthless in punishing companies once it has lost confidence in them. It matters not whether this loss of faith is rooted in fact or just sentiment. The events of the past 18 months - in particular the end of the dot.com bubble and the collapse of Enron - have led to a more questioning attitude from investors to company structures and accounts. This puts an onus on companies to ensure their operations are as transparent as possible and that they communicate efficiently with the investment commmunity.
It follows that the challenge now for Elan and AIB is to rebuild investor confidence. It will not be achieved without cost and the market will want to see individuals responsible held to account. But the consequences of failure - both for the companies them selves and the wider economy - will be grave. Both companies are profitable and have strong capital bases. However, if they do not quickly come to terms with their current difficulties they may suffer a longer-term loss of investor faith, or even become vulnerable to takeover.