Corporate Governance and Risk Assessment of Flexigroup Limited

This report examines the corporate governance practices of Flexigroup Limited, a company listed on the ASX. It analyzes the company's adherence to the ASX Corporate Governance Principles, focusing on key areas such as board structure, ethical conduct, financial reporting, risk management, and shareholder rights. The report also conducts a risk assessment, identifying and evaluating potential risks faced by Flexigroup, including credit risk, liquidity and market risk, operational risk, and compliance risk. The report concludes by outlining the company's strategies for mitigating these risks and ensuring its long-term sustainability.

HI6026 - Audit, Assurance, and
Compliance
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Executive summary
The report that is presented below provides the information about the corporate governance of
the flexi group limited. In this, the company which is listed in the ASX is required to follow all
the principles which have been set in respect of it, There are in whole 8 principles and they all
will be mentioning the different aspects. All of them will be used so that the objectives of the
company will be met in the most appropriate manner. The implication of the same for the
company will also be explained. Together with this, the risk assessment procedure will be
performed in which position of the company will be evaluated. There will be various ratios
which will be calculated for the same. The company faces certain risks and all of them will be
determined and with that, the steps which will be taken for their elimination will also be
considered.
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Table of Contents
Executive summary.........................................................................................................................2
ASX Corporate Governance Principles...........................................................................................4
Lay solid foundations for management and oversight.................................................................4
Structure the board to add value..................................................................................................4
Act ethically and responsibly.......................................................................................................5
Safeguard integrity in corporate reporting...................................................................................6
Make timely and balanced disclosure..........................................................................................7
Respect the rights of security holders..........................................................................................7
Recognise and manage risk.........................................................................................................7
Remunerate fairly and responsibly..............................................................................................8
Risk assessment...............................................................................................................................9
References......................................................................................................................................12
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ASX Corporate Governance Principles
Lay solid foundations for management and oversight
The company has certain objectives which are required to be achieved and for that proper
management is required and this will be possible when the business will have proper directors.
For this, it is required that all the roles which are to be played by them together with their
responsibilities shall be appropriately disclosed (Kraakman & Hansmann, 2017). There shall be a
proper system in the company by which it will be possible to evaluate and monitor their
performance at regular interval of time.
The implication for Flexigroup Limited:
The responsibilities of the board have been set in the policy which is made in this respect and
they include:
 All the strategies of the business are to be evaluated and also the plans will be approved
by them which are framed.
 Financial performance and operations of the company are to be monitored.
 Establishment of internal control after the identification of principal risks.
 Setting of proper reporting mechanism so that timely information is provided to all the
shareholders.
In addition to them, there are various other roles which are to be played by them and the
committees are set in this respect such as nomination, remuneration, and risk committee
(Flexigroup limited, 2017). The management of the company is responsible to manage the
activities in such manner by which it will be possible to attain the parameters which are
described by the board. The risks which have a material impact are to be determined so that they
can be managed appropriately.
Structure the board to add value
This principle covers the composition of the board which is maintained by the company. In this,
the size will be determined so that it can be ascertained whether it is appropriate or not. The
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skills and competencies of all will have to be evaluated to know their ability to discharge the
duties which are allocated to them as this will be defining the success of the business.
The implication for Flexigroup Limited:
The Flexigroup is having a proper nomination committee which is framed so that it can provide
the advice to the board in relation to the selection of the competent directors and then evaluation
of their performance is done by them. The process of induction will be developed so that new
appointees are provided proper knowledge (Flexigroup limited, 2017). The skills which are to be
possessed by them are also specified in the skill matrix.
The composition structure is there in which all the executives, as well as non-executive directors,
are involved and names of all are provided below:
Chairman: Andrew Abercrombie
CEO (Non-independent): Symon Brewis Weston
Non-executive (Independent): Christine Christian
Non-executive (Independent): Rajeev Dhawan
Non-executive (Independent): Jodie Leonard
Non-executive (Independent): R John Skippen
They are provided with the induction in which training is given and all the information about the
values and strategies which are followed are provided to them so that they can be followed. The
focus is also given on the professional development of them in which skills of them are
maintained.
Act ethically and responsibly
The company is required to have the proper code of conduct in accordance with this principle in
which all the ethical considerations are involved. By that, it will be possible to maintain the
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operations in an ethical manner and there will be no issues that are to be considered. The
principle needs that this shall be followed in a proper manner.
The implication for Flexigroup Limited:
The flexible limited has a code of conduct which is required to be followed by all the
stakeholders of the business. All the policies which are made in addition to this will also have to
be complied with as they are reviewed in proper timing and are updated. In the conduct of the
company all the benchmarks are provided which are to be considered and by this, the image of
the company will be maintained in the society (Flexigroup limited, 2017). The consequences
which are to be borne are specified in this if there is any kind of the breach that is made.
One of the policies which are made in this respect includes trading policy in which it is stated
that the employees and directors will be dealing in the shares of the company only if they are not
having any kind of price sensitive information.
Safeguard integrity in corporate reporting
This principle deals with the integrity that is required to be maintained in the company in respect
of the reporting (Orionequities, 2017). It is required that members shall be aware of the
procedure which is to be followed in reporting and then it shall be made in such manner by
which the interest of anyone is not affected in adverse impact, especially company.
The implication for Flexigroup Limited:
In the company, this is followed and all the skills which are there with the directors and others
are specified in the annual report of the company. The risk management is made and in that
assistance is provided by audit committee to the board so that they can fulfill the responsibilities
in most effective manner. All the statements are reviewed by the auditor’s so that transparency
and accuracy of the reports are ensured and there is no risk which will be identified in the
coming period in relation to it.
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Make timely and balanced disclosure
According to this principle, there are various such aspects which are required to be reported to
the ASX on the timely manner and there is the need to make appropriate disclosure in this
respect. Due to this, there are the policies which are framed by the company for the same.
The implication for Flexigroup Limited:
In accordance with the Corporation Act, 2001 company has made a disclosure policy by which
the listing regulations of ASX will be met and the proper disclosures will be made to them. A
committee has been made in which CEO, CFO and company secretary are its member so that it
can check that proper disclosure is being made or not (Flexigroup limited, 2017). All the
presentations which are provided to other shareholders are also filed with the ASX at the same
time.
Respect the rights of security holders
Shareholders are the important part of the company and due to that this principle has been made
according to which the company will be required to make the disclosure of all the material
information to them. There shall be a proper system for the same so that all of them can use the
information for their required purposes.
The implication for Flexigroup Limited:
Flexigroup is following the policy of appropriate communication in which all the information is
given to shareholders by which they can exercise their rights in the best manner. For this, the
annual report of the company will be circulated to all of them. Also, the website of the company
is updated at a regular interval of time.
Recognise and manage risk
The principles state that company shall company with the requirements that are there in respect
of this. For that, there will be a proper risk management system which shall be made so all the
risks which are involved can be ascertained and then measures can be taken to control them
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(Cohen, et. al., 2017). By this the overall benefit will be received by the company as the
performance will be improved.
The implication for Flexigroup Limited:
In the Flexigroup there is the risk management framework by which it is ensured that all the
activities are performed in better manner and risk is considered in relation to them. All of them
shall be identified and then properly managed. A risk compliance committee has been made in
which the members are experts and can comply with the governance and other policies
(Flexigroup limited, 2017). The internal audit which is performed is revised so that better
assurance can be provided by them.
Remunerate fairly and responsibly
The company is required to have the adequate remuneration policy as per this principle and so
such payments shall be made which will be fair for all. By that, the employees will be motivated
and this will lead to the attainment of the business objectives in a more effective manner as they
will be performing with much dedication.
The implication for Flexigroup Limited:
In the company, there are policies which have been framed for the board and other directors.
There are proper systems according to which the remuneration of the CEO and other executives
are defined in a proper manner and they are paid the amount which is set as per the framework. If
there is any change then it is properly evaluated. The committee will be reviewing all the process
from time to time.
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Risk assessment
Flexigroup is involved in the business of the financial services in which they are providing the
best financial products and payment solutions for various purposes whether they are personal or
commercial. They are carrying out the operations in New Zealand, Australia, and Ireland. The
main business units of the business include cards, leasing, and Certegy (Flexigroup limited,
2017). The cards are provided to the customers and also financing services are provided for the
rent and lease payments.
The company has made various strategies which help them in the attainment of business
objectives. They include digitization, consolidation of consumer business in which the data
management is centralized. They are looking forward to entering the new markets and also on
the launching of the new products. Stronger governance will be built on it and also they will be
focusing on the commercial leasing.
The risks which are involved will have to be identified in an appropriate manner and for that
analytical procedure will be followed (Putra, 2018). In that certain techniques are there which
will have to be carried so that proper analysis can be made and all the required steps are taken for
the same (Auditinghelp, 2018). In the given case ratios are being calculated and they are
provided below.
Information needed for calculations:
Particulars 2017(in
$'000)
2016(in
$'000)
Sales 462.
8
396.
4
Total assets 2,785.
9
2,679.
6
Current assets 804.
1
885.
4
Current liabilities 58.
7
58.
5
working capital 745.
4
826.
9
EBIT 224.
2
148.
7
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Retained earning 293.
6
247.
5
Total debt 2,007.
7
1,948.
5
Market value of
equity
671.
8
612.
4
Calculation of ratios:
Particulars 2017 2016
Working capital/Total assets 0.27 0.31
Retained earnings/Total
assets
0.11 0.09
EBIT/Total assets 0.08 0.06
The market value of
equity/Total debt
0.33 0.31
Sales/Total assets 0.17 0.15
The business is performed and there are certain risks which are involved in them and so it is
required that proper measures shall be taken in relation to that. For this risk assessment
procedure is needed in which the company will be including such processes in the business by
which all of them will be identified and then policies will be formulated by which the same can
be eliminated. There are various types of risks which are involved and ones which are faced by
Flexigroup limited are provided hereunder:
 Credit risk: This occurs when there is a failure on part of customers and they fail to make
the payment by which company is to incur the losses (Flexigroup limited, 2017).
 Liquidity and market risk: the company is not able to meet its obligations when they arise
and also the assets are not funded in the proper manner. The change in the market factors also
has the adverse impact on the business.
 Operational risk and compliance risk: The risks which arise due to inappropriate
operations or non-compliance with any law are covered in this.
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The company will be required to take the appropriate steps for the resolving of the issues which
are determined and they are as follows:
 In order to manage the credit cycle in the company, there are policies which have been
prepared in which orientation, documentation, approval and other steps will be involved.
 To deal with the market and liquidity risk there are policies in relation to treasury
management in which main elements related to it are addressed (Flexigroup limited, 2017).
 A proper system has been set in which such policies are framed by which monitoring is done
for complying with the regulations so that reduction in risk is achieved.
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References
 Auditinghelp. (2018). Identifying and Assessing the Risks of Material Misstatement
through Understanding the Entity and Its Environment. Auditinghelp. [Online]. Available at:
https://auditinghelp.com/identifying-and-assessing-the-risks-of-material-misstatement-
through-understanding-the-entity-and-its-environment-13914. [Accessed: 25 April 2018]
 Cohen, J., Krishnamoorthy, G., & Wright, A. (2017). Enterprise risk management and the
financial reporting process: The experiences of audit committee members, CFOs, and
external auditors. Contemporary Accounting Research, 34(2), 1178-1209.
 Flexigroup limited. (2017). Annual Report. Flexigroup limited. 6-110. [Online] Available
At: https://investors.flexigroup.com.au/FormBuilder/_Resource/_module/
7jG9ikYqmkOo8Txf6baoiQ/file/annual-reports/fg-2017_annual-report-fa.pdf. [Accessed: 25
April 2018]
 Flexigroup limited. (2017). Corporate governance Report. Flexigroup limited. 3-17.
[Online] Available At:
https://investors.flexigroup.com.au/FormBuilder/_Resource/_module/
7jG9ikYqmkOo8Txf6baoiQ/file/corporate-governance/
FlexiGroup_Corporate_Governance_Report.pdf. [Accessed: 25 April 2018]
 Kraakman, R., & Hansmann, H. (2017). The end of history for corporate law.
In Corporate Governance (pp. 49-78). Gower.
 Orionequities. (2017). Corporate governance statement. Orionequities. [Online].
Available at: http://www.orionequities.com.au/sites/default/files/20171018%20OEQ
%20ASX%20Corporate%20Governance%20Statement%20-%202017.pdf. [Accessed: 25
April 2018]
 Putra, L.D. (2018). The Use Of Analytical Procedures In Auditing. Accounting Financial &
tax. [Online]. Available at: http://accounting-financial-tax.com/2010/04/the-use-of-
analytical-procedures-in-auditing/. [Accessed: 25 April 2018]
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