Table of Contents
Nature and relevance of risk to corporate accountability3
Importance and implementation of risk analysis and risk management systems.4
Risk management framework7
Risk at ABC9
ABC’s Financial Statement10
Comparing and contrasting corporate governance13
Corporate Governance Theories13
Usefulness of publicly available information16
Nature and relevance of risk to corporate accountability
Corporate accountability and risk, although related, are distinct from one another. Corporate accountability suggests legal compliance, business ethics, sustainable development and corporate citizenship. Risk management essentially involves minimizing potential harms to both shareholders and stakeholders.
The nature of risk management can have many objectives. While reducing or mitigating risk is the most common platform, in the corporate accountability sense, doing good can also been seen as a potential risk to the operations of the business. Subsequently, risk management is very relevant to corporate accountability in context as to how the company is operating.
Blanchard 2003 suggests corporate accountability can be defined as a control system designed to monitor the firm’s operations and the possible conflicts of interests between the different stakeholders.
The board of directors is usually considered as one of the most important mechanisms used to achieve such tasks, especially when it comes to risk management. The main functions of directors are to protect the interests of the shareholders and to guide the firm in business operations, with the objective to maximise the firm’s value or the value of its shares. Business risk management concerns risk, returns and responsibility (ABI, 2004). Strategic planning is required to understand the nature of each component with respect to risk as they each concern the direction of the corporation in different manners. Collectively, the components point to two major objectives, which as articulated above are not dissimilar to the role of directors; avoiding financial loss on shareholders, and perhaps more importantly to avoid imposing loss on stakeholders. Importance and implementation of risk analysis and risk management systems. Risk management
In the recent past, most significantly due to the financial crisis of the past five years, but even since the turn of the century, risk management responsibilities of the board of directors have become well established, and increasingly well practised.
Strategic planning, allocation of resources, evaluation techniques as well as high ethical and moral standards all combine to produce effective risk management.
Planning is important to make sure that the company is focused and being guided in the best possible direction. Streamlining the workforce to maximise their potential, utilising their strengths help reduce underproduction and increase optimal output. Frequent performance evaluation perhaps on a semi-annual, but at a minimum annually assist with maximising employee potential output. Adhering to moral and ethical codes as part of a company guideline creature a positive working culture.
The importance of corporate risk management includes risk evaluation, risk assessment and management of risk. Essentially the implementation of these ideals is up to the corporation itself, specifically the board. However, the government and its policies, in which jurisdiction the corporate resides will also heavily influence and address risk management procedures.
While Governments have the legislative authority to impose rules on various agencies and corporations, allowing them to have control that is, in some senses, similar to that of a shareholder, in many ways that authority is more like that of a regulator than a shareholder.
Risk managers within governments do not have to answer to shareholders (but...