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BLO 2205 Corporate Law and Risk Management

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VICTORIA UNIVERSITY

   

BLO 2205 Corporate Law (BLO 2205)

   

Added on  2020-03-04

BLO 2205 Corporate Law and Risk Management

   

VICTORIA UNIVERSITY

   

BLO 2205 Corporate Law (BLO 2205)

   Added on 2020-03-04

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Running head: RISK MANAGEMENT Risk Management Name of the studentName of the universityAuthor note
BLO 2205 Corporate Law and Risk Management_1
1RISK MANAGEMENT a)As provided by principle 7 of the Australian Securities and Investment Commission it isthe duty of the board of directors of a listed company to identify risk and adopt a properframework to address them. In case there is a failure on the part of the board of the listedorganizations to recognize or address risks it might not only have an adverse effect on theorganization but also the stakeholders such as shareholders, creditors, employees , consumersand the society as a whole1. According to the recommendations provided by AISC on riskmanagement, the listed organization’s board should have in place at least one committee tooversee identify and address risks. The committee must have three independent directors. Itfurther states that the committee of the board or the board itself must review the riskmanagement structure of the company every year at the least so that they can be sure that it iseffective. The process of the review must also be disclosed in order to ensure accountability. Theinternal audit function of the entity has to be disclosed in accordance to structure and role of thefunction. It is also the duty of a listed organization to disclose any kind of material exposure onits part in relation to social, environmental and economic risk and further how such risks areintended to be managed by the organization. In the given circumstances it has been provided bythat a substantial financial harm had been suffered by the company Ardent Leisure Ltd (Ardent)in relation to the Dreamworld leisure park (Dreamworld) operated and owned by them on theQueensland Gold Coast. This was because an accident had taken place at Dreamworld which hadresulted in the death of a few partons as a result of a ride failure. Accidents are events which arebeyond the control of the owners. However if proper safety measures are taken accidents can beavoided to a large extent and its effects could be minimized. In this situation it has been provided1Council, ASX Corporate Governance, and A. S. Exchange. "Corporate governance principles andrecommendations . ASX Corporate Governance Council." (2014).
BLO 2205 Corporate Law and Risk Management_2
2RISK MANAGEMENT that no proper initiatives had been taken by the company after the incident which can be saidbecause the company had been criticized for not been able to deal with the risk arising from theincident. The owner of a place is liable to any harm which has been caused to any person withrespect to the place. Thus in this case Ardent is liable for the accident. If the risk managementframework would have been placed Ardent would have been able to identify the risk associatedwith the ride before any accident took place and the risk could have been addressed properly.Even if the accident would have taken place after a proper risk identification system the harmfrom the accident would have been minimized if a proper framework would have been in placeto manage the incident. However people were killed and the and not only it was a social loss butalso a severe financial and goodwill loss for the company. Thus it can be said that the board ofArdent failed to recognize and manage risk in relation to the incident. b)As discussed above the principle 7 of the Good Corporate Governance Recommendationsimposes an obligation on the listed organizations to identify and manage risks through theimplementation of a proper risk management framework2. The principles highlight the formationof one or more risk management committees within the organization which would have the roleto identify and risk situation and have a framework in place for addressing it. In the providedcircumstances Dreamworld needed a crisis management team in place which would have beenable to ensure prompt action with respect to the accident and the adverse effects of it would havebeen minimized. Principle 7 further provides for a disclosure of any economic, social orenvironmental risk and if such recommendation would have been followed by Ardent that theywould have been more accountable towards the identification of risk and the accident could have2Tricker, RI Bob, and Robert Ian Tricker.Corporate governance: Principles, policies, and practices. Oxford University Press, USA, 2015
BLO 2205 Corporate Law and Risk Management_3

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