BLO 2205 Corporate Law Risk Management

Added on -2020-02-23

| BLO 2205| 11 pages| 2611 words| 144 views

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Running head: RISK MANAGEMENT Risk Management Name of the studentName of the universityAuthor note
1RISK MANAGEMENT APrinciple 7 of the Australian Security and Investment Commission states that the board ofdirectors with respect to a public company have the duty to detect risk and implementappropriate structure towards addressing them. If the board of directors in relation to a publiclisted company is not able to identify and implement proper measures for addressing the riskthey might not only bring losses for the shareholders, consumers, employees and the societybut also to the organisation as a whole. The ASX has provided a few recommendation inrelation to management of risk according to which the board of a public company mustimplement a minimum of one committee for the purpose of identifying and mitigating risk.The committee must comprise of a minimum of three directors who would be totallyindependent with respect to their working1. It is further provided by the risk managementrecommendations that the risk management framework of a company should be analysed andevaluated at a minimum of yearly basis in order to ensure its effectivity. For the purpose ofensuring accountability the process related to such review also has to be disclosed. It is alsothe duty of such committee or directors to ensure that the structure and role of the internalaudit functions are disclosed. Any material exposure related to economic, environmental andsocial risk have to be disclosed by a public entity along with the structure adopted for thepurpose of managing such risk by the company. In the provided scenario it has been giventhat significant financial losses have been incurred by the company in context Ardent leisureLimited (Ardent). The financial and Goodwill loss have been incurred because of DreamWorld leisure Park which was owned and operated by the company and is located atQueensland Gold Coast. The loss was a result of a major accident which took place in the1Council, ASX Corporate Governance, and A. S. Exchange. "Corporate governance principles andrecommendations . ASX Corporate Governance Council." (2014).
2RISK MANAGEMENT park and took the life of four partons because of alleged technical failure in a ride. Accidentsare majorly result of human mistake but in case appropriate measures for safety areimplemented these events can be avoided or the harm caused by them can be curtailed.However in the given circumstances it has been alleged that the company failed to take anyproper initiative immediately after the deadly event took place and therefore Adrian had beensubjected to immense criticism for not being capable of handling post accident period in anappropriate manner. It is common law that the owner of a premises is liable for any harmcaused to the occupier of such premises. Therefore it can evidently be said that the companyis liable for the accident. If the company would have adopted an appropriate riskmanagement framework it would have been potent enough to recognise the risk in relation tothe ride and after recognition the risk would have been addressed in a proper manner. In thegiven circumstances if a proper risk identification system would have been adopted by thecompany even if the accident would have been caused the after effects of the accident wouldhave been minimised. The company was moreover not able to handle the post accidentperiod in a professional manner which caused immense hardship to the families of thedeceased. However search Framework was not in place and the accident took place whichnot only caused financial loss to the company but also social loss and loss of goodwill.Therefore it can evidently be provided that the board of directors of the company were notable to identify an address is with respect to the accident. BIt has already been provided in the above section that principle 7 of the ASX related to goodcorporate governance recommendation enforces our duty on public companies to recogniseand address risk by implementing appropriate framework of risk management. The setting up
3RISK MANAGEMENT of one or more committee is related to risk management have been highlighted by theprinciples with respect to the organisation. The committees have to be provided with the roleof recognising and addressing this situation and setting up a proper structure within thecompany to manage search risk. In relation to the given scenario a crisis management teamwas needed to be in place with respect to Dreamland which should have ensured that rapidaction is taken in relation to the accident and therefore the harm resulting out of such incidentcould have been diminished.2 The disclosure of any social, environmental or economic risk isalso provided by principal 7 and in case search provisions had been adopted by the companythere accountability towards recognising risk situation would have been enhanced and thedreadful incident would not have taken place. Therefore it can be stated upon the analysis ofthe fact that the company has not complied with principal 7 provided by ASX in relation togood governance as it has not been able to recognise and address risks3. Not only legal consequences the company has to suffer high level competitive disadvantagebecause of poor governance and breaching the provisions related to risk managementprovided by principal 7 of the ASX. A failure related to addressing and identifying riskssubjects a company to unwanted incidents which are definitely not in the best interest of thecompany. Not recognising this makes the company increasingly subjected to unwantedincident and in addition the absence of a good Framework for addressing the effects of theincident heavy losses have to be incurred by the company4. The value of the organisation inthe society also decreases following such incidents along with financial losses. As a resultreluctance can be identified within the investors to invest in the organisation. Further no2Tricker, RI Bob, and Robert Ian Tricker.Corporate governance: Principles, policies, and practices. Oxford University Press, USA, 20153Pritchard, Carl L., and PMI-RMP PMP.Risk management: concepts and guidance. CRC Press, 2014.4Council, ASX Corporate Governance. "Corporate Governance Principles and Recommendations, 3rd edn (ASX, Sydney)." (2014).

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